SCHEDULES

Section 5

SCHEDULE 1Income tax: abolition of non-residents' personal reliefs

Introduction

1Chapter 1 of Part 7 of ICTA (income tax: personal reliefs) is amended as follows.

Abolition of reliefs

2Omit—

(a)section 256 (general),

(b)section 256A (“adjusted net income”),

(c)section 256B (“the minimum amount”),

(d)section 257 (personal allowance),

(e)sections 257A to 257BB (married couple’s allowance etc),

(f)section 257C (indexation),

(g)section 265 (blind person’s allowance),

(h)section 273 (payments securing annuities), and

(i)section 278 (non-residents).

Consequential amendments

3(1)Section 266 (life assurance premiums) is amended as follows.

(2)In subsection (1)—

(a)for “individual” substitute “eligible individual”, and

(b)omit “or makes a payment falling within subsection (7) below”.

(3)After that subsection insert—

“(1A)For the purposes of subsection (1) above an individual is an eligible individual if the individual—

(a)is resident in the United Kingdom, or

(b)meets the conditions in section 56(3) of ITA 2007.”

(4)In subsection (3), omit “(7),”.

(5)In subsection (4), for “subsections (7) and” substitute “subsection”.

(6)Omit subsection (7).

(7)In subsection (8), for “and is entitled to relief by virtue of section 278(2) or (2ZA)” substitute “(but is entitled to relief by virtue of subsection (1A)(b))”.

4(1)Section 274 (limits on relief under sections 266 and 273) is amended as follows.

(2)In subsection (1), omit “or other sums”.

(3)In subsection (2)—

(a)for “sections 266 and 273” substitute “section 266”, and

(b)omit “or sums”, and

(c)for “the appropriate rate” substitute “12.5%”.

(4)Omit subsection (3).

(5)In subsection (4), omit “or other sum” (in both places).

(6)In the heading, for “sections 266 and 273” substitute “section 266”.

5In paragraph 6(1) of Schedule 14 (provisions ancillary to section 266), omit “, otherwise than in accordance with subsection (7) of that section,”.

Repeals

6Omit—

(a)in TMA 1970—

(i)in section 36(3A), “section 257BA of the principal Act or”,

(ii)in section 37A, “section 257BB or 265 of the principal Act or”, and

(iii)in section 43A(2A)(a), “section 257BA of the principal Act or”,

(b)in FA 1988, section 33 and, in Schedule 3, paragraphs 8 and 10,

(c)in FA 1989, section 33(4)(a), (5)(b), (8)(a) and (9)(b),

(d)in F(No.2)A 1992, in Schedule 5, paragraphs 2, 8(4) and 9(3),

(e)in FA 1993, section 107(3)(a),

(f)in FA 1994, section 77(1) and (2),

(g)in FA 1996, in Schedule 20, paragraph 14(3) and, in Schedule 21, paragraphs 4 to 6,

(h)in FA 1997, section 56(2),

(i)in FA 1998, section 27(1)(a) and, in Schedule 3, paragraph 10,

(j)in FA 1999, sections 25(3), 31 and 32,

(k)in FA 2000, section 39(8) and (9),

(l)in ITEPA 2003, in Schedule 6, paragraph 35,

(m)in FA 2004, in Schedule 35, paragraph 12,

(n)in ITTOIA 2005, in Schedule 1, paragraph 124,

(o)in ITA 2007—

(i)in section 23, in Step 3, “or section 257 or 265 of ICTA”,

(ii)in sections 26(1)(a) and 27(5), “or section 257A, 257AB, 257BA or 257BB of ICTA”,

(iii)in section 423(5), “or section 257 or 265 of ICTA”, “or section 257A, 257AB, 257BA or 257BB of ICTA”, “or section 266(7) of ICTA” and “or section 273 of ICTA”,

(iv)in section 811, in subsection (5), “or section 278(2) of ICTA” and, in subsection (6), “or section 257 or 265 of ICTA”, “or section 257A, 257AB, 257BA or 257BB of ICTA” and “or section 273 of ICTA”,

(v)in section 833(5), “or section 278 of ICTA”,

(vi)in Schedule 1, paragraphs 27 to 35, 36(5) and (6), 37 and 232(2), and

(vii)in Schedule 2, Part 4,

(p)in FA 2008—

(i)in section 2(1) and (2), paragraph (b) and the “and” before it,

(ii)in section 3, in subsection (1), “and section 257(2) of ICTA” and “and section 257(3) of ICTA” and, in subsection (2), paragraph (b) and the “and” before it, and

(iii)in Schedule 39, paragraphs 18 to 20, and

(q)in this Act, in section 3(1) and (2), paragraph (b) and the “and” before it.

Commencement

7The amendments made by this Schedule have effect for the tax year 2010-11 and subsequent tax years.

Section 6

SCHEDULE 2Income tax rates

Part 1Amendments of ITA 2007

1ITA 2007 is amended as follows.

2(1)Section 6 (rates of income tax) is amended as follows.

(2)In subsection (2), for “and higher rate” substitute “, higher rate and additional rate”.

(3)In the heading, for “and higher rate” substitute “, higher rate and additional rate”.

3(1)Section 8 (dividend ordinary rate and dividend upper rate) is amended as follows.

(2)Insert at the end—

“(3)The dividend additional rate is 42.5%.”

(3)In the heading, for “and dividend upper rate” substitute “, dividend upper rate and dividend additional rate”.

4(1)Section 10 (income charged at basic and higher rates: individuals) is amended as follows.

(2)In subsection (3), insert at the end “and up to the higher rate limit.”

(3)After that subsection insert—

“(3A)Income tax is charged at the additional rate on an individual’s income above the higher rate limit.”

(4)After subsection (5) insert—

“(5A)The higher rate limit is £150,000.”

(5)In subsection (6), for “is” substitute “and higher rate limit are”.

(6)In the heading, for “and higher” substitute “, higher and additional”.

5(1)Section 13 (income charged at dividend ordinary and dividend upper rates: individuals) is amended as follows.

(2)After subsection (2) insert—

“(2A)Income tax is charged at the dividend additional rate on an individual’s income which—

(a)is dividend income,

(b)would otherwise be charged at the additional rate, and

(c)is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005.”

(3)In subsection (3), for “and (2)” substitute “to (2A)”.

(4)In subsection (4), for “or higher” substitute “, higher or additional”.

(5)In the heading, for “and dividend upper” substitute “, dividend upper and dividend additional”.

6In section 414(2)(b) (relief for gifts to charity), after “limit” insert “and the higher rate limit”.

7In section 515(a) (rate of tax in respect of heritage maintenance settlements), for “higher rate” substitute “additional rate”.

8(1)Section 989 (definitions) is amended as follows.

(2)After the definition of “Act” insert—

““additional rate” means the rate of income tax determined in pursuance of section 6(2),”.

(3)After the definition of “distribution” insert—

““dividend additional rate” means the rate of income tax specified in section 8(3),”.

(4)After the definition of “higher rate” insert—

““higher rate limit” has the meaning given by section 10,”.

9(1)Schedule 4 (index of defined expressions) is amended as follows.

(2)After the entry relating to “Act” insert—

(3)In the entry relating to “basic rate limit”, for “20(2)” substitute “10”.

(4)After the entry relating to “dividends (in Chapter 1 of Part 13)” insert—

(5)After the entry relating to “higher rate” insert—

Part 2Amendments of other Acts

FA 2004

10Part 4 of FA 2004 (pension schemes etc) is amended as follows.

11In section 192 (relief for pension contributions at source), for subsection (4) substitute—

“(4)If (apart from this section) income tax at the higher rate or the additional rate is chargeable in respect of any part of the individual’s total income for the tax year, on the making of a claim the basic rate limit and the higher rate limit for the tax year in the individual’s case are increased by the amount of the contribution.”

12In section 208 (unauthorised payments charge), for subsection (6) substitute—

“(6)The Treasury may by order amend subsection (5) so as to vary the rate of the unauthorised payments charge.

(6A)An order under subsection (6) may make provision for there to be different rates in different circumstances.”

13In section 209 (unauthorised payments surcharge), for subsection (7) substitute—

“(7)The Treasury may by order amend subsection (6) so as to vary the rate of the unauthorised payments surcharge.

(8)An order under subsection (7) may make provision for there to be different rates in different circumstances.”

14In section 215 (amount of lifetime allowance charge), after subsection (2) insert—

“(2A)The Treasury may by order amend subsection (2) so as to vary the rates of the lifetime allowance charge.

(2B)An order under subsection (2A) may make provision for there to be different rates in different circumstances.”

15In section 227 (annual allowance charge), after subsection (5) insert—

“(5A)The Treasury may by order amend subsection (4) so as to vary the rate of the annual allowance charge.

(5B)An order under subsection (5A) may make provision for there to be different rates in different circumstances.”

16In section 240 (amount of scheme sanction charge), after subsection (3) insert—

“(3A)The Treasury—

(a)may by order amend subsection (1) so as to vary the rate of the scheme sanction charge, and

(b)may by order amend subsection (3)(a) so as to vary the percentage mentioned there.

(3B)An order under subsection (3A) may make provision for there to be different rates or percentages in different circumstances.”

17In section 242 (de-registration charge), insert at the end—

“(5)The Treasury may by order amend subsection (4) so as to vary the rate of the de-registration charge.

(6)An order under subsection (5) may make provision for there to be different rates in different circumstances.”

18(1)Section 282 (orders and regulations) is amended as follows.

(2)After subsection (1) insert—

“(1A)No order may be made under section 208(6), 209(7), 215(2A), 227(5A), 240(3A) or 242(5) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons.”

(3)In subsection (2), after “Part” insert “, if made without a draft having been approved by a resolution of the House of Commons,”.

ITTOIA 2005

19ITTOIA 2005 is amended as follows.

20In section 640(6)(b) (grossing-up of deemed income)—

(a)omit the “and” at the end of sub-paragraph (i), and

(b)insert at the end “up to and including the year 2009-2010, and

(iii)50%, if the relevant tax year is the year 2010-2011 or any subsequent tax year.”

21In section 669(3) (reduction in residuary income: inheritance tax on accrued income)—

(a)in paragraph (a), after “charged at” insert “the additional rate or”, and

(b)in paragraph (b), after “charged at” insert “the dividend additional rate or”.

22In section 685A(3) (settlor-interested settlements), for “higher rate” substitute “additional rate”.

23(1)Part 2 of Schedule 4 (index of defined expressions) is amended as follows.

(2)After the entry relating to “acquisition expenditure (in Chapter 9 of Part 2)” insert—

(3)After the entry relating to “distribution” insert—

F(No.2)A 2005

24In section 7(5) of F(No.2)A 2005 (charge to income tax on social security pension lump sum)—

(a)in paragraph (d), after “basic rate limit for that year” insert “but does not exceed the higher rate limit for that year”, and

(b)after that paragraph insert—

“(e)if P’s Step 3 income for that year of assessment exceeds the higher rate limit for that year, the additional rate for that year.”

Part 3Commencement

25(1)The powers conferred by the amendments made by this Schedule may be exercised at any time on or after the day on which this Act is passed but not so as to make provision having effect before the tax year 2010-11.

(2)Subject to that, the amendments made by this Schedule have effect for the tax year 2010-11 and subsequent tax years.

Section 9

SCHEDULE 3VAT: supplementary charge and orders changing rate

Part 1Supplementary charge to VAT

The charge

1(1)There is a supplementary charge on a supply of goods or services that is treated as taking place on or after 25 November 2008 if—

(a)the supply spans the date of the VAT change,

(b)it is subject to VAT at the rate in force under section 2 of VATA 1994,

(c)the person to whom the supply is made is not entitled under VATA 1994 to credit for, or the repayment or refund of, all of the VAT on the supply, and

(d)a relevant condition is met.

(2)In this Schedule “the date of the VAT change” means 1 January 2010.

(3)For the cases in which a supply, other than the grant of a right to goods or services, spans the date of the VAT change and the relevant conditions in relation to such a supply, see paragraph 2.

(4)For the cases in which a supply consisting of the grant of a right to goods or services spans the date of the VAT change and the relevant conditions in relation to such a supply, see paragraph 3.

(5)Sub-paragraph (1) has effect subject to the exceptions made by or under Part 2 of this Schedule.

(6)In this Schedule—

• Part 3 contains provision about liability for, and the amount of, a supplementary charge under this Schedule,

• Part 4 contains special provision about listed supplies, and

• Part 5 contains provision about administration and interpretation.

(7)A supplementary charge under this Schedule is to be treated for all purposes as if it were value added tax charged in accordance with VATA 1994.

Supply spanning the date of the VAT change

2(1)For the purposes of this Schedule a supply of goods or services spans the date of the VAT change where—

(a)by virtue of the issue of a VAT invoice or the receipt of a payment by the person making the supply (“the supplier”), the supply is treated as taking place before the date of the VAT change, but

(b)the basic time of supply (see paragraph 4) is on or after the date of the VAT change.

(2)The relevant conditions are—

(a)in relation to a supply that is within sub-paragraph (1)(a) by virtue of the issue of a VAT invoice, conditions A to D, and

(b)in relation to a supply that is within sub-paragraph (1)(a) by virtue of the receipt of a payment, conditions A to C.

(3)Condition A is that the supplier and the person to whom the supply is made are connected with each other at any time in the period—

(a)beginning with the day on which the supply is treated as taking place, and

(b)ending on the date of the VAT change.

(4)Paragraph 5 modifies condition A in cases involving a series of supplies.

(5)Condition B is that the aggregate of the following is more than £100,000—

(a)the relevant consideration for the supply, and

(b)the relevant consideration for every related supply of goods or services (including every related grant of a right to goods or services) that spans the date of the VAT change (see paragraph 6).

(6)Condition C is that a prepayment in respect of the supply is financed by the supplier or a person connected with the supplier (see paragraph 7).

(7)In sub-paragraph (6) “prepayment”, in respect of a supply, means a payment that is received by the supplier before the basic time of supply.

(8)Condition D is that full payment of the amount shown on the VAT invoice referred to in sub-paragraph (1)(a) is not due before the end of the period of 6 months beginning with the date on which the invoice is issued.

(9)This paragraph does not apply in relation to a supply consisting of the grant of a right to goods or services (see paragraph 3).

Grant of right spanning the date of the VAT change

3(1)For the purposes of this Schedule a supply consisting of the grant by a person (“the grantor”) of a right to goods or services spans the date of the VAT change where—

(a)that supply is treated as taking place before the date of the VAT change,

(b)the goods or services are to be supplied at a discount or free of charge, and

(c)the basic time of supply for the supply of some or all of the goods or services (see paragraph 4) is on or after the date of the VAT change.

(2)In relation to the grant of the right, the relevant conditions are conditions A to C.

(3)Condition A is that the grantor and the person to whom the right is granted are connected with each other at any time in the period—

(a)beginning with the day on which the supply consisting of the grant of the right is treated as taking place, and

(b)ending on the date of the VAT change or, if the right is exercised (entirely or partly) on a later date, that date (or, if more than one, the first of those dates).

(4)Paragraph 5 modifies condition A in cases involving a series of supplies.

(5)Condition B is that the aggregate of the following is more than £100,000—

(a)the relevant consideration for the grant of the right, and

(b)the relevant consideration for every related supply of goods or services (including every related grant of a right to goods or services) that spans the date of the VAT change (see paragraph 6).

(6)Condition C is that the payment made in respect of the grant of the right is financed by the grantor or a person connected with the grantor (see paragraph 7).

(7)In this Schedule references to a right to goods or services include—

(a)any right or option with respect to such goods or services, and

(b)any interest deriving from such a right or option.

“Basic time of supply”

4(1)In this Schedule the “basic time of supply” is the time given by subsection (2) or (3) of section 6 of VATA 1994 (disregarding subsections (4) to (14) of that section).

(2)Sub-paragraph (1) does not apply in relation to listed supplies (see Part 4 of this Schedule).

Series of supplies

5(1)This paragraph applies where—

(a)the supply or grant of a right referred to in paragraph 2 or 3 (“the affected supply or grant”) is one of a series of supplies of, or grants of a right to, the same or substantially the same goods or services, and

(b)each of the supplies, and the grants of a right, in the series was or will be made in the expectation that the affected supply or grant would or will take place.

(2)In condition A in paragraphs 2 and 3 the references to the supplier and the grantor include any person who makes one of the supplies or grants one of the rights in the series.

“Relevant consideration” and “related” supplies

6(1)This paragraph applies for the purposes of condition B in paragraphs 2 and 3.

(2)“Relevant consideration” means—

(a)in relation to a supply that is within paragraph 2(1) by virtue of the issue of a VAT invoice, the amount shown on that invoice,

(b)in relation to a supply that is within paragraph 2(1) by virtue of the receipt of a payment, the amount of that payment, and

(c)in relation to a grant of a right to goods or services within paragraph 3(1), the consideration for the grant of the right,

but does not include any amount in respect of VAT.

(3)A supply within paragraph 2(1), or a grant of a right within paragraph 3(1), is related to another such supply or grant if they are both made as part of the same scheme.

(4)“Scheme” includes any arrangements, transaction or series of transactions.

Financing

7(1)This paragraph applies for the purposes of condition C in paragraphs 2 and 3.

(2)A payment is financed by a person if, directly or indirectly, the person—

(a)provides funds to enable the person to whom the supply is made to make the whole or part of the payment (whether the funds are provided before or after the payment is made),

(b)procures the provision of such funds by another person,

(c)provides funds for discharging (in whole or in part) any liability that has been or may be incurred by any person for or in connection with raising funds to enable the person to whom the supply is made to make the payment, or

(d)procures that any such liability is or will be discharged (in whole or in part) by another person.

(3)In sub-paragraph (2) the references to providing funds for a purpose are to—

(a)making a loan of funds that are or are to be used for that purpose,

(b)providing a guarantee or other security in relation to such a loan,

(c)providing consideration for the issue of shares or other securities issued wholly or partly for raising those funds,

(d)providing consideration for the acquisition by any person of any such shares or securities, or

(e)any other transfer of assets or value as a consequence of which any of those funds are made available for that purpose.

Connected persons

8Section 839 of ICTA (connected persons) applies for the purposes of this Schedule.

Receipt of payments

9In this Schedule a reference to receipt of a payment by the person making a supply or granting a right (however expressed) includes a reference to receipt by a person to whom a right to receive it has been assigned.

Power to change relevant conditions

10(1)The Treasury may by order amend this Part of this Schedule by adding, modifying or omitting relevant conditions.

(2)An order under this paragraph—

(a)may make different provision for different cases, and

(b)may make incidental or consequential amendments of this Schedule.

Supplies treated as taking place before 31 March 2009

11In relation to supplies treated as taking place before 31 March 2009, this Schedule has effect as if—

(a)paragraphs 2(5), 3(5) and 6 (condition B) and all references to condition B were omitted,

(b)in paragraph 2(6) (condition C), the words “or a person connected with the supplier” were omitted, and

(c)in paragraph 3(6) (condition C), the words “or a person connected with the grantor” were omitted.

Part 2Exceptions

Letting etc of assets

12(1)This paragraph applies in relation to a supply within paragraph 2 which arises from the letting, hiring or rental of assets.

(2)There is no supplementary charge under this Schedule if—

(a)the period to which the VAT invoice or payment referred to in paragraph 2(1) relates does not exceed 12 months, and

(b)the VAT invoice is issued, or the payment is received, in accordance with normal commercial practice in relation to the letting, hiring or rental of such assets.

Condition B cases involving normal commercial practice

13There is no supplementary charge under this Schedule on a supply of goods or services within paragraph 2 or a grant of a right to goods or services within paragraph 3 if—

(a)the only relevant condition met is condition B, and

(b)the supply is made, or the right is granted, in accordance with normal commercial practice in relation to the supply of, or the grant of a right to, such goods or services.

Normal commercial practice

14In this Part of this Schedule “normal commercial practice” means normal commercial practice at a time when an increase in the rate of VAT in force under section 2 of VATA 1994 is not expected.

Further exceptions

15(1)The Treasury may by order provide that there is no supplementary charge under this Schedule on supplies (including grants of rights to goods or services) of a description specified in the order.

(2)An order under this paragraph may make provision having effect in relation to supplies of goods or services that are treated as taking place on or after 25 November 2008 or a later date.

Part 3Liability and amount

Liability

16(1)A supplementary charge under this Schedule on a supply within paragraph 2—

(a)is a liability of the supplier (subject to sub-paragraph (3)), and

(b)becomes due on the date of the VAT change (rather than at the time of supply).

(2)A supplementary charge under this Schedule on a supply consisting of the grant of a right to goods or services within paragraph 3—

(a)is a liability of the grantor (subject to sub-paragraph (3)), and

(b)becomes due on the first occasion on or after the date of the VAT change on which the right is exercised (rather than at the time the right is granted).

(3)If, on the date on which the supplementary charge becomes due, the person who would be liable to pay the charge under sub-paragraph (1) or (2)—

(a)is not a taxable person, but

(b)is treated as a member of a group under sections 43A to 43D of VATA 1994,

the supplementary charge is a liability of the representative member of the group.

Amount

17(1)The amount of the supplementary charge on a supply within paragraph 2 is equal to the difference between—

(a)the amount of VAT chargeable on the supply apart from this Schedule, and

(b)the amount of VAT that would be chargeable on the supply if it were subject to VAT at the rate of 17.5%.

(2)The amount of the supplementary charge on a grant of a right to goods or services within paragraph 3 is equal to the difference between—

(a)the amount of VAT chargeable on the grant of the right apart from this Schedule, and

(b)the amount of VAT that would be chargeable on the grant of the right if it were subject to VAT at the rate of 17.5%,

(but see sub-paragraph (3)).

(3)If the basic time of supply for some of those goods and services is before the date of the VAT change, sub-paragraph (2) has effect as if the references to the amount of VAT chargeable and to the amount of VAT that would be chargeable were references to the relevant proportion of each of those amounts.

(4)“The relevant proportion” is—

Part 4Listed supplies

“Listed supply”

18(1)In this Schedule “listed supply” means a supply falling within sub-paragraph (2)—

(a)which is made for a consideration the whole or part of which is determined or payable periodically or from time to time, and

(b)which is treated as taking place by virtue of the issue of a VAT invoice or the receipt of a payment by the person making the supply.

(2)The following supplies fall within this sub-paragraph—

(a)a supply of services,

(b)a supply arising from the grant of a major interest in land,

(c)a supply of water other than—

(i)distilled water, deionised water or water of similar purity, or

(ii)bottled water,

(d)a supply of—

(i)coal gas, water gas, producer gases or similar gases, or

(ii)petroleum gases, or other gaseous hydrocarbons, in a gaseous state,

(e)a supply of power, heat, refrigeration or ventilation, and

(f)a supply of goods together with services in the course of the construction, alteration, demolition, repair or maintenance of a building or civil engineering work.

(3)The Treasury may by order amend sub-paragraph (2) by—

(a)adding or omitting any description of supply, or

(b)varying any description of supply for the time being listed in that sub-paragraph.

“Basic time of supply”: listed supplies

19(1)For the purposes of this Schedule, in relation to a listed supply, “the basic time of supply” is the end of the period to which the VAT invoice or payment mentioned in paragraph 18(1) relates, except as provided in sub-paragraphs (2) and (4).

(2)Where the person making the supply issues an invoice—

(a)in respect of part of the listed supply to which the VAT invoice or payment mentioned in paragraph 18(1) relates, and

(b)for a period (a “billing period”) ending before the end of the period to which that VAT invoice or payment relates,

• “the basic time of supply”, in relation to that part of the supply, is the end of the billing period.

(3)For the purposes of sub-paragraph (2) the listed supply (and the consideration for the supply) must be apportioned between periods on a just and reasonable basis.

(4)Where a listed supply is treated as taking place by virtue of—

(a)the issue by the person making the supply of a VAT invoice relating to a premium for the grant of a tenancy or lease, or

(b)the receipt by the person making the supply of such a premium,

• “the basic time of supply” is the date of the grant of the tenancy or lease.

Part 5Administration and interpretation

Person ceasing to be taxable person before supplementary charge due

20(1)This paragraph applies if, on the date on which a supplementary charge under this Schedule becomes due (“the due date”), the person who is liable to pay the charge under paragraph 16 is not a taxable person.

(2)The supplementary charge must be accounted for by that person in accordance with VATA 1994 (and regulations made under that Act) as if it were VAT due in the last period for which the person was required to make a return by or under VATA 1994.

(3)If an amount assessed as due by way of supplementary charge under this Schedule would (in the absence of this sub-paragraph) carry interest from a date earlier than the due date, it is to be treated as only carrying interest from the due date.

Adjustment of contracts following the VAT change

21(1)This paragraph applies where—

(a)a contract for the supply of goods or services is made before the date of the VAT change, and

(b)there is a supplementary charge under this Schedule on the supply.

(2)The consideration for the supply is to be increased by an amount equal to the supplementary charge, unless the contract provides otherwise.

Invoices

22Regulations under paragraph 2A of Schedule 11 to VATA 1994 (VAT invoices) may make provision about the provision, replacement or correction of invoices in connection with a supplementary charge under this Schedule.

Orders under this Schedule

23(1)An order under this Schedule is to be made by statutory instrument.

(2)A statutory instrument containing an order under this Schedule is subject to annulment in pursuance of a resolution of the House of Commons, unless it is an instrument to which sub-paragraph (4) applies.

(3)Sub-paragraph (4) applies to a statutory instrument containing an order made under paragraph 10 (or under that paragraph and under other provisions) which extends the supplies that are subject to a supplementary charge under this Schedule.

(4)An instrument to which this sub-paragraph applies—

(a)must be laid before the House of Commons, and

(b)ceases to have effect at the end of the period of 28 days beginning with the day on which it was made unless it is approved during that period by a resolution of the House of Commons.

(5)In reckoning the period of 28 days no account is to be taken of any time during which Parliament is dissolved or prorogued or during which the House of Commons is adjourned for more than 4 days.

(6)The order ceasing to have effect does not affect—

(a)anything previously done under it, or

(b)the making of a new order.

Interpretation: general

24(1)Expressions used in this Schedule and in VATA 1994 have the same meaning in this Schedule as in that Act.

(2)In this Schedule—

(a)“treated as taking place” means treated as taking place for the purposes of the charge to VAT, and

(b)references to the person by or to whom a supply is made (however expressed) are to the person by or to whom the supply is treated as being made for the purposes of VATA 1994.

Part 6Amendments of VATA 1994

25(1)VATA 1994 is amended as follows.

(2)In section 2(2) (orders increasing or decreasing rate of VAT), after “such order” insert “that has not previously expired or been revoked”.

(3)In section 97 (orders, rules and regulations), after subsection (4) insert—

“(4A)Where an order under section 2(2) is in force, the reference in subsection (4)(c)(i) of this section to the rate of VAT in force under section 2 at the time of the making of an order is a reference to the rate which would be in force at that time if no such order had been made.”

Section 14

SCHEDULE 4Vehicle excise duty: further provision about rates of duty etc

1VERA 1994 is amended as follows.

2(1)Section 3 (duration of licences) is amended as follows.

(2)In subsection (4)(b), for “a licence taken out on the first registration under this Act of” substitute “the first vehicle licence for”.

(3)Insert at the end—

“(7)Neither subsection (2) nor any order under subsection (3) permits the first vehicle licence for a vehicle to be taken out for a period of less than twelve months if the annual rate of vehicle excise duty chargeable on the licence would be lower if it were not the first vehicle licence for the vehicle.”

3(1)Section 19 (rebates) is amended as follows.

(2)In subsection (1), for “from the Secretary of State the amount specified in subsection (2)” substitute “the relevant amount from the Secretary of State”.

(3)Omit subsection (2).

(4)After subsection (3) insert—

“(3A)Subject to subsection (3B), the relevant amount is an amount equal to one-twelfth of the annual rate of duty chargeable on the licence (at the time when it was taken out) in respect of each complete month of the period of the currency of the licence which is unexpired when the application is made.

(3B)Where—

(a)the licence is the first vehicle licence for the vehicle,

(b)the application is made by virtue of paragraph (d), (e) or (f) of subsection (3), and

(c)the annual rate of duty rate chargeable on the licence (at the time when it was taken out) would have been lower if it had not been the first vehicle licence for the vehicle,

the relevant amount is an amount equal to one-twelfth of that lower annual rate of duty in respect of each such complete month.”

4(1)Section 62 (definitions) is amended as follows.

(2)In subsection (1), after the definition of “exempt vehicle” insert—

““first vehicle licence”, in relation to a vehicle, means (subject to subsections (1B) and (1C)) the vehicle licence for the vehicle on the issue of which the vehicle is first registered under this Act (so that, if the vehicle is first registered on the issue of a nil licence, there is no first vehicle licence in relation to it),”.

(3)After subsection (1A) insert—

“(1B)Where a vehicle is first registered under this Act on the issue of a temporary licence, the “first vehicle licence” in relation to the vehicle is the first vehicle licence subsequently issued for it.

(1C)Where a vehicle—

(a)has been registered under the law of a country or territory outside the United Kingdom,

(b)is first registered under this Act more than 6 months after the time when it was first registered as mentioned in paragraph (a), and

(c)has travelled more than 6,000 kilometres under its own power before it is first registered under this Act,

there is no first vehicle licence in relation to the vehicle.”

5(1)Schedule 1 (annual rates of duty) is amended as follows.

(2)In paragraph 1A (vehicles to which Part 1A applies)—

(a)in sub-paragraph (1)(a), after “registered”, and

(b)in sub-paragraph (5), after “registration”,

insert “, under this Act or under the law of a country or territory outside the United Kingdom,”.

(3)In paragraph 1C (the reduced rate)—

(a)in sub-paragraph (3)(a), after “registration” insert “, under this Act or under the law of a country or territory outside the United Kingdom,”,

(b)in sub-paragraph (3)(b), for “its” substitute “that”, and

(c)in sub-paragraph (4), after “registration” insert “under this Act”.

(4)In paragraph 1H (vehicles to which Part 1B applies)—

(a)in sub-paragraph (1)(a), after “registered”, and

(b)in sub-paragraph (3), after “registration”,

insert “, under this Act or under the law of a country or territory outside the United Kingdom,”.

(5)In paragraph 1K(a) (pre-2007 lower-emission vans), after “registered” insert “, under this Act or under the law of a country or territory outside the United Kingdom,”.

(6)In paragraph 1M(a) (post-2008 lower-emission vans), after “registered” insert “, under this Act or under the law of a country or territory outside the United Kingdom,”.

6(1)Paragraph 25 of Schedule 2 (exempt vehicles: light passenger vehicles with low CO₂ emissions) is re-numbered as sub-paragraph (1) of that paragraph.

(2)After that sub-paragraph insert—

“(2)A vehicle is an exempt vehicle for the appropriate period if—

(a)it is a vehicle to which Part 1A of Schedule 1 applies, and

(b)the applicable CO₂ emissions figure (as defined in paragraph 1A(3) and (4) of that Schedule) exceeds 100g/km but does not exceed 130g/km.

(3)“The appropriate period” is the period for which (if the vehicle were not an exempt vehicle by virtue of sub-paragraph (2)) the first vehicle licence for the vehicle would (if taken out) have effect.”

7(1)The amendments made by this Schedule have effect in relation to licences taken out on or after 1 April 2010.

(2)But the amendments made by paragraph 5 do not have effect in relation to vehicles first registered under this Act before that date.

Section 17

SCHEDULE 5Air passenger duty

Amendments

1Chapter 4 of Part 1 of FA 1994 (air passenger duty) is amended as follows.

2(1)Section 30 (rates of duty) is amended as follows.

(2)After subsection (8) insert—

“(8A)The Treasury may by order amend Schedule 5A.”

(3)Omit subsections (9) to (9B).

3For section 39 substitute—

“39Schemes for simplified operation of Chapter

(1)This section applies if the Commissioners consider that, having regard to difficulties encountered or expected to be encountered by any registered operator in obtaining and recording information about passengers and their journeys, it is appropriate for this Chapter to have effect in relation to the registered operator in accordance with a special accounting scheme.

(2)The Commissioners may agree with the registered operator that this Chapter is to have effect in relation to the registered operator in accordance with a special accounting scheme agreed between the Commissioners and the registered operator (but subject to subsection (4)).

(3)A special accounting scheme is a scheme which makes provision for methods of calculating—

(a)how many persons are to be regarded for the purposes of this Chapter as chargeable passengers carried by chargeable aircraft operated by a registered operator, and

(b)how many of those are to be so regarded as having been so carried on journeys in respect of which duty is chargeable at any particular rate.

(4)The Commissioners may publish a notice specifying terms and conditions subject to which special accounting schemes are to have effect.

(5)Where the Commissioners and a registered operator have agreed that this Chapter is to have effect in relation to the registered operator in accordance with a special accounting scheme, this Chapter has effect in relation to the registered operator in accordance with the scheme (and with any notice under subsection (4) which has been published by the Commissioners and not withdrawn) for the period agreed by the Commissioners and the registered operator.

(6)The Commissioners and the registered operator may at any time agree to vary the special accounting scheme for the future.

(7)The Commissioners may at any time terminate the operation of the special accounting scheme—

(a)on the application of the registered operator, or

(b)where they have reasonable grounds for doing so,

by giving notice to the registered operator.”

4In section 42(4) (orders), after “chargeable passengers” insert “, or to increase the rate of air passenger duty to be charged on the carriage of any chargeable passengers whose journeys end in any place,”.

5After Schedule 5 insert—

“SCHEDULE 5AAir passenger duty: territories etc

Part 1Part 1 territories

Part 2Part 2 territories

Part 3Part 3 territories

Consequential repeals

6In consequence of the amendments made by section 17 and this Schedule, omit—

(a)in FA 1995, section 15,

(b)in FA 2000, in section 18—

(i)subsections (1) to (5), and

(ii)subsection (7),

(c)in FA 2002, section 121, and

(d)in FA 2007, section 12.

Commencement etc

7The amendments made by paragraphs 2(3) and 6(a), (b)(i), (c) and (d) have effect in relation to the carriage of passengers beginning on or after 1 November 2009.

8(1)No agreement for Chapter 4 of Part 1 of FA 1994 to have effect in relation to a registered operator in accordance with a special accounting scheme pursuant to section 39 of FA 1994 as substituted by paragraph 3 may be made so as to have effect as respects the carriage of passengers beginning before 1 November 2009.

(2)Nothing in this Schedule affects the continuing operation of, or of schemes prepared under, that section as it has effect immediately before this Act is passed as respects the carriage of passengers beginning before 1 November 2009.

Section 23

SCHEDULE 6Temporary extension of carry back of losses

Income tax

1(1)A person who has made a loss in a trade in the tax year 2008-09 or 2009-10 may make a claim for relief under this paragraph if—

(a)relief is available to the person under section 64 of ITA 2007 (trade loss relief against general income) in relation to an amount of the loss (“the section 64 amount”), and

(b)condition A or B is met.

(2)Condition A is that the person makes a claim under that section for relief in respect of the section 64 amount—

(a)where it is a loss made in the tax year 2008-09, for either or both of the tax years 2007-08 and 2008-09, or

(b)where it is a loss made in the tax year 2009-10, for either or both of the tax years 2008-09 and 2009-10.

(3)Condition B is that—

(a)where it is a loss made in the tax year 2008-09, for the tax years 2007-08 and 2008-09, or

(b)where it is a loss made in the tax year 2009-10, for the tax years 2008-09 and 2009-10,

the person’s total income is nil or does not include any income from which a deduction could be made in pursuance of a claim under that section for relief in respect of the section 64 amount.

(4)The amount of the loss that may be relieved under this paragraph (“the deductible amount”) is—

(a)in a case where condition A is met, so much of the section 64 amount as cannot be relieved pursuant to the claim under section 64 of ITA 2007, and

(b)in a case where condition B is met, the whole of the section 64 amount,

(but see sub-paragraph (12)).

(5)A claim for relief under this paragraph is for the deductible amount to be deducted (in accordance with sub-paragraph (6) and with whichever is applicable of sub-paragraphs (7), (8), (9) and (10))—

(a)where it is a loss made in the tax year 2008-09, in either or both of the following ways—

(i)in computing the person’s total income for either or both of the tax years 2005-06 and 2006-07 in accordance with section 835 of ICTA, and

(ii)in calculating the person’s net income for the tax year 2007-08 in accordance with Step 2 of the calculation in section 23 of ITA 2007 (which applies as if this paragraph were a provision listed in section 24 of that Act), or

(b)where it is a loss made in the tax year 2009-10, in either or both of the following ways—

(i)in computing the person’s total income for the tax year 2006-07 in accordance with section 835 of ICTA, and

(ii)in calculating the person’s net income for either or both of the tax years 2007-08 and 2008-09 in accordance with Step 2 of the calculation in section 23 of ITA 2007 (which applies as if this paragraph were a provision listed in section 24 of that Act).

(6)A deduction is to be made only from profits of the trade (and accordingly, in relation to the tax years 2007-08 and 2008-09, subsection (2) of section 25 of ITA 2007 has effect as if this sub-paragraph were included in subsection (3) of that section).

(7)This sub-paragraph explains how the deductions are to be made in a case where the loss is made in the tax year 2008-09 and the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for the tax year 2007-08.

• Step 1

  Deduct the deductible amount from the profits of the trade for the tax year 2006-07.

• Step 2

  Deduct from the profits of the trade for the tax year 2005-06 so much of the deductible amount as has not been deducted under Step 1.

(8)This sub-paragraph explains how the deductions are to be made in any other case where the loss is made in the tax year 2008-09.

• Step 1

  Deduct the deductible amount from the profits of the trade for the tax year 2007-08.

• Step 2

  Deduct from the profits of the trade for the tax year 2006-07 so much of the deductible amount as has not been deducted under Step 1.

• Step 3

  Deduct from the profits of the trade for the tax year 2005-06 so much of the deductible amount as has not been deducted under Step 1 or 2.

(9)This sub-paragraph explains how the deductions are to be made in a case where the loss is made in the tax year 2009-10 and the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for the tax year 2008-09.

• Step 1

  Deduct the deductible amount from the profits of the trade for the tax year 2007-08.

• Step 2

  Deduct from the profits of the trade for the tax year 2006-07 so much of the deductible amount as has not been deducted under Step 1.

(10)This sub-paragraph explains how the deductions are to be made in any other case where the loss is made in the tax year 2009-10.

• Step 1

  Deduct the deductible amount from the profits of the trade for the tax year 2008-09.

• Step 2

  Deduct from the profits of the trade for the tax year 2007-08 so much of the deductible amount as has not been deducted under Step 1.

• Step 3

  Deduct from the profits of the trade for the tax year 2006-07 so much of the deductible amount as has not been deducted under Step 1 or 2.

(11)The provision made by the preceding provisions means that the following sections of ITA 2007 apply in relation to relief under this paragraph as in relation to relief under section 64 of that Act—

(a)section 66 to 70 (restrictions on relief under section 64),

(b)sections 74B to 74D (general restrictions on relief),

(c)sections 75 to 79 (restrictions on relief under section 64 and early trade losses relief in relation to capital allowances),

(d)section 80 (restrictions on those reliefs in relation to ring fence income), and

(e)section 81 (restrictions on those reliefs in relation to dealings in commodity futures).

(12)The total amount that may be deducted in accordance with sub-paragraph (7), or in accordance with Steps 2 and 3 in sub-paragraph (8), is limited to £50,000; and the total amount that may be deducted in accordance with sub-paragraph (9), or in accordance with Steps 2 and 3 in sub-paragraph (10), is also limited to £50,000.

2(1)A claim for relief under paragraph 1 must be made—

(a)where the relief is in respect of a loss made in the tax year 2008-09, on or before the first anniversary of the normal self-assessment filing date for that tax year, and

(b)where the relief is in respect of a loss made in the tax year 2009-10, on or before the first anniversary of the normal self-assessment filing date for that tax year.

(2)Paragraph 1 applies to professions and vocations as it applies to trades.

(3)Paragraph 1 is subject to paragraph 2 of Schedule 1B to TMA 1970 (claims for loss relief involving 2 or more years).

(4)Sections 61 to 63 of ITA 2007 (meaning of “making a loss in a tax year” etc and prohibition against double counting) have effect as if paragraph 1 were included in Chapter 2 of Part 4 of that Act.

(5)Subsections (1) to (3) of section 127 of that Act (UK furnished holiday lettings business treated as trade) have effect as if paragraph 1 were included in Part 4 of that Act.

(6)The reference in paragraph 3(1) of Schedule 2 to the Social Security Contributions and Benefits Act 1992 and the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (levy of Class 4 contributions with income tax) to section 64 of ITA 2007 includes paragraph 1.

Corporation tax

3(1)Section 393A of ICTA (losses: set off against profits of same or earlier accounting period) has effect in relation to any loss to which this paragraph applies as if, in subsection (2) of that section, “3 years” were substituted for “twelve months” (but subject as follows).

(2)This paragraph applies to any loss incurred by a company in a trade in a relevant accounting period (but subject to sub-paragraph (3)); and a relevant accounting period is one ending after 23 November 2008 and before 24 November 2010.

(3)The maximum amount of loss to which this paragraph applies in the case of any company is—

(a)£50,000 in relation to losses incurred in relevant accounting periods ending after 23 November 2008 and before 24 November 2009, and

(b)£50,000 in relation to losses incurred in relevant accounting periods ending after 23 November 2009 and before 24 November 2010;

and the overall limit or limits apply whether a loss is incurred by the company in only one relevant accounting period or losses are so incurred in more than one such period.

(4)Subject to that, if in the case of the company the length of a relevant accounting period is less than one year, the maximum amount of the loss incurred in that period that may be set off under section 393A of ICTA by virtue of this paragraph is the relevant proportion of £50,000.

(5)“The relevant proportion” is—

(6)The reference in subsection (2C) of section 393A of ICTA to so much of the loss referred to in that subsection not falling within subsection (2B) of that section as does not exceed the amount of the allowance mentioned in subsection (2C)(b) (“the subsection (2C) loss”) has effect in relation to a relevant accounting period as a reference to so much of the subsection (2C) loss as exceeds that which can be set off under section 393A of ICTA by virtue of this paragraph.

Section 26

SCHEDULE 7Contaminated and derelict land

Part 1Amendments of Part 14 of CTA 2009

1Part 14 of CTA 2009 (remediation of contaminated land) is amended as follows.

2In the heading of the Part, after “contaminated” insert “or derelict”.

3(1)Section 1143 (overview of Part) is amended as follows.

(2)In subsection (1), after “contamination” insert “or dereliction”.

(3)In subsection (7), after “contaminated” insert “or derelict”.

4(1)Section 1144 (“qualifying land remediation expenditure”) is amended as follows.

(2)In subsection (1), for “E” substitute “F”.

(3)In subsection (2), insert at the end “or a derelict state (see section 1145A)”.

(4)In subsection (3), after “contaminated” insert “or derelict”.

(5)For subsection (4) substitute—

“(4)Condition C is that it is—

(a)in the case of land in a contaminated state, expenditure on relevant contaminated land remediation undertaken by the company (see section 1146), or

(b)in the case of land in a derelict state, expenditure on relevant derelict land remediation so undertaken (see section 1146A).”

(6)In subsection (5), for paragraph (c) (and the “or” before it) substitute—

“(c)incurred in respect of relevant land remediation contracted out by the company to another person with whom the company is not connected, or

(d)qualifying expenditure on connected sub-contracted land remediation (see section 1175).”

(7)After subsection (6) insert—

“(6A)Condition F is that the expenditure is not incurred on landfill tax.”

5For section 1145 substitute—

“1145Land “in a contaminated state”

(1)For the purposes of this Part land is in a contaminated state if (and only if), because of something in, on or under the land, the land is in a condition such that—

(a)relevant harm is being caused, or

(b)there is a serious possibility that relevant harm will be caused.

(2)But land is not in a contaminated state by reason of the presence in, on or under it of—

(a)living organisms or decaying matter deriving from living organisms, air or water, or

(b)anything present otherwise than as a result of industrial activity.

(3)The Treasury may by order specify circumstances in which subsection (2) is not to apply to the extent specified in the order; and an order under this subsection may contain incidental, supplemental, consequential and transitional provision and savings.

(4)In this section “relevant harm” means—

(a)death of living organisms or significant injury or damage to living organisms,

(b)significant pollution of controlled waters,

(c)a significant adverse impact on the ecosystem, or

(d)structural or other significant damage to buildings or other structures or interference with buildings or other structures that significantly compromises their use.

1145ALand “in a derelict state”

For the purposes of this Part land is in a derelict state if (and only if) the land—

(a)is not in productive use, and

(b)cannot be put into productive use without the removal of buildings or other structures.

1145BExclusion of nuclear sites

(1)A nuclear site is not land in a contaminated state or land in a derelict state for the purposes of this Part.

(2)“Nuclear site” means—

(a)any site in respect of which a nuclear site licence is for the time being in force, or

(b)any site in respect of which, after the revocation or surrender of a nuclear site licence, the period of responsibility of the licensee has not yet come to an end.

(3)In subsection (2) “nuclear site licence”, “licensee” and “period of responsibility” have the same meaning as in the Nuclear Installations Act 1965.”

6(1)Section 1146 (“relevant land remediation”) is amended as follows.

(2)In subsection (1)—

(a)for “land remediation”, in relation to land” substitute “contaminated land remediation”, in relation to land which is in a contaminated state and in which a major interest has been”, and

(b)for “and B” substitute “to C”.

(3)In subsection (3)—

(a)in paragraph (a), for “harm, or any pollution of controlled waters,” substitute “relevant harm”, and

(b)omit paragraph (b) (and the “or” before it).

(4)After that subsection insert—

“(3A)Condition C is that the activities are not—

(a)activities of a description specified by order made by the Treasury, or

(b)activities required by or by virtue of any enactment specified by such an order.

(3B)An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings.”

(5)In subsection (5), for the words after “(and only if)” substitute “because of something in, on or under the land by virtue of which it is contaminated land, the land is in a condition such that—

(a)significant pollution of those waters is being caused, or

(b)there is a serious possibility that significant pollution of those waters will be caused.”

(6)In the heading, after “relevant” insert “contaminated”.

7After that section insert—

“1146A“Relevant derelict land remediation”

(1)For the purposes of this Part “relevant derelict land remediation”, in relation to land which is in a derelict state and in which a major interest has been acquired by a company, means—

(a)activities in relation to which conditions A and B are met, and

(b)if there are such activities, relevant preparatory activity.

(2)Condition A is that the activities comprise the doing of any works, the carrying out of any operations or the taking of any steps in relation to the land in question.

(3)Condition B is that the purpose of the activities is a purpose specified by order made by the Treasury.

(4)An order under subsection (3) may contain incidental, supplemental, consequential and transitional provision and savings.

(5)For the purposes of subsection (1)(b) “relevant preparatory activity” has the same meaning as for the purposes of subsection (1)(b) of section 1146 (see subsection (4) of that section, but reading the reference to subsection (1)(a) of that section as a reference to subsection (1)(a) of this section).”

8In the heading of Chapter 2, after “contaminated” insert “or derelict”.

9(1)Section 1147 (deduction for capital expenditure) is amended as follows.

(2)In subsection (2), after “that” insert “a major interest in”.

(3)For subsection (3) substitute—

“(3)Condition B is that—

(a)in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition, and

(b)in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of—

(i)1 April 1998, and

(ii)the date on which a major interest in the land was first acquired by the company or a person who was connected with the company.

(3A)The Treasury may by order—

(a)specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or

(b)replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date.

(3B)An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings.”

10(1)Section 1149 (additional deduction for qualifying land remediation expenditure) is amended as follows.

(2)In subsection (2), after “that” insert “a major interest in”.

(3)For subsection (3) substitute—

“(3)Condition B is that—

(a)in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition, and

(b)in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of—

(i)1 April 1998, and

(ii)the date on which a major interest in the land was first acquired by the company or a person who was connected with the company.

(3A)The Treasury may by order—

(a)specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or

(b)replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date.

(3B)An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings.”

11(1)Section 1150 (no relief if company responsible for contamination) is amended as follows.

(2)The existing provision becomes subsection (1) of that section.

(3)In that subsection, for “state if the land is in that” substitute “or derelict state if the land is in a contaminated or derelict”.

(4)After that subsection insert—

“(2)A company is not entitled to relief under this Chapter in respect of expenditure on land all or part of which is in a contaminated or derelict state if—

(a)the land is in that state wholly or partly as a result of any thing done, or omitted to be done, by a person not within subsection (1), and

(b)that person, or a person connected with that person, has a relevant interest in the land.

(3)For the purposes of subsection (2) a person has a relevant interest in land if the person—

(a)holds any interest in, right over or licence to occupy the land (including an option to acquire any such interest, right or licence in any circumstances), or

(b)has disposed of any estate or interest in the land for a consideration that to any extent reflects the impact, or likely impact, on the value of the land of the remediation of its contamination or dereliction.”

(5)In the heading, insert at the end “or dereliction or polluter has interest”.

12(1)Section 1161 (relief in respect of I minus E basis: enhanced expenses payable) is amended as follows.

(2)In subsection (2), after “that” insert “a major interest in”.

(3)For subsection (3) substitute—

“(3)Condition B is that—

(a)in the case of land in a contaminated state, the land was in a contaminated state at the time of the acquisition by the company of a major interest in the land, and

(b)in the case of land in a derelict state, the land was in a derelict state throughout the period beginning with the earlier of—

(i)1 April 1998, and

(ii)the date on which a major interest in the land was first acquired by the company or a person who was connected with the company.

(3A)The Treasury may by order—

(a)specify circumstances in which the condition in paragraph (a) of subsection (3) need not be met, or

(b)replace the date for the time being specified in paragraph (b)(i) of that subsection with a later date.

(3B)An order under subsection (3A) may contain incidental, supplemental, consequential and transitional provision and savings.”

(4)In subsection (4)—

(a)for “Chapter 4” substitute “land remediation”, and

(b)omit “(see section 1162)”.

(5)Omit subsection (5).

(6)In subsection (6), omit “150% of”.

(7)In the heading, omit “enhanced”.

(8)In the heading before the section omit “for qualifying Chapter 4 expenditure”.

13For section 1162 substitute—

“1162Additional relief

(1)If a company is entitled to relief under section 1161 for an accounting period it is also entitled to relief under this section for the period.

(2)For the company to obtain the relief it must make a claim.

(3)The relief is that the company may treat 50% of the qualifying Chapter 4 expenditure as expenses payable which fall to be brought into account at Step 3 in section 76(7) of ICTA (deduction for expenses payable).

(4)For the purposes of this Chapter “the qualifying Chapter 4 expenditure” means—

(a)the company’s qualifying land remediation expenditure for the accounting period, less

(b)the amount (if any) which as a result of paragraph (a) of Step 1 in section 76(7) of ICTA is not to be brought into account at that step as expenses payable for the period.”

14(1)Section 1163 (no relief if company responsible for contamination) is amended as follows.

(2)The existing provision becomes subsection (1) of that section.

(3)In that subsection—

(a)after “1161” insert “or 1162”, and

(b)for “state if the land is in that” substitute “or derelict state if the land is in a contaminated or derelict”.

(4)After that subsection insert—

“(2)A company is not entitled to relief under this Chapter in respect of expenditure on land all or part of which is in a contaminated or derelict state if—

(a)the land is in that state wholly or partly as a result of any thing done, or omitted to be done, by a person not within subsection (1), and

(b)that person, or a person connected with that person, has a relevant interest in the land.

(3)For the purposes of subsection (2) a person has a relevant interest in land if—

(a)the person holds any interest in, right over or licence to occupy the land (including an option to acquire any such interest, right or licence in any circumstances), or

(b)has disposed of any estate or interest in the land for a consideration that to any extent reflects the impact, or likely impact, on the value of the land of the remediation of its contamination or dereliction.”

(5)In the heading, insert at the end “or dereliction or polluter has interest”.

15In section 1165(1)(a) (meaning of “qualifying life assurance business loss”), after “1161” insert “or 1162”.

16In section 1169(2)(c) and (3)(c) (artificially inflated claims for relief), after “1161” insert “or 1162”.

17(1)Section 1173 (expenditure incurred because of contamination) is amended as follows.

(2)In subsections (1) and (2), after “contaminated” insert “or derelict”.

(3)For subsection (3) substitute—

“(3)Subsection (4) applies—

(a)in the case of land in a contaminated state, if the main purpose of any activities is any of those specified in section 1146(3), or

(b)in the case of land in a derelict state, if the main purpose of any activities is any of those specified in section 1146A(3).”

(4)In the heading, insert at the end “or dereliction”.

18Omit section 1174 (sub-contractor payments: introductory).

19(1)Section 1175 (“qualifying expenditure on sub-contracted land remediation”: connected persons) is amended as follows.

(2)After subsection (1) insert—

“(1A)In this section, a “sub-contractor payment” means a payment made by the company to the sub-contractor in respect of relevant land remediation contracted out by the company to the sub-contractor.”

(3)In subsection (2), for “sub-contracted land remediation” substitute “connected sub-contracted land remediation” for the purposes of section 1144(5)”.

(4)In subsection (3)—

(a)in paragraph (a), after “carrying on” insert “or arranging for carrying on”, and

(b)in paragraph (c) for “incurred on” substitute “in respect of”.

(5)For the heading substitute “Connected sub-contractors”.

20Omit section 1176 (“qualifying expenditure on sub-contracted land remediation”: other cases).

21In section 1178 (persons having a “relevant connection” to a company)—

(a)after “contaminated” insert “or derelict”, and

(b)in paragraph (b), after “when” insert “a major interest in”.

22After section 1178 insert—

“1178A“Major interest in land”

(1)References in this Part to the acquisition of a major interest in land are to the acquisition of a freehold interest in the land or of a relevant leasehold interest in the land.

(2)The reference in subsection (1) to the acquisition of a freehold interest in land is—

(a)in relation to land in England and Wales, to the acquisition of an estate in fee simple absolute (whether subsisting at law or in equity),

(b)in relation to land in Scotland, to the acquisition of the interest of an owner of land, and

(c)in relation to land in Northern Ireland, to the acquisition of any freehold estate (whether subsisting at law or in equity).

(3)The reference in subsection (1) to the acquisition of a relevant leasehold interest in land is to the acquisition by grant or assignment (or assignation) of—

(a)in relation to land in England and Wales, a term of years absolute (whether subsisting at law or in equity),

(b)in relation to land in Scotland, the tenant’s right over or interest in a property subject to a lease, or

(c)in relation to land in Northern Ireland, any leasehold estate (whether subsisting at law or in equity),

in relation to which the condition in subsection (4) is met.

(4)That condition is that—

(a)in the case of a grant, the term of years or period of the lease is at least 7 years, and

(b)in the case of an assignment (or assignation) the unexpired portion of the term or period is at least 7 years.”

23In section 1179 (definitions), omit the definitions of “harm” and “land” and the definition of “substance” (apart from the “and” at the end).

Part 2Amendments of other enactments

ICTA

24In section 76(7) of ICTA (expenses of insurance companies), in step 3—

(a)for “1161” substitute “1162”,

(b)for “150%” substitute “50% additional”, and

(c)after “contaminated” insert “or derelict”.

FA 1998

25In Schedule 18 to FA 1998 (company tax returns etc), in the heading of Part 9B, after “contaminated” insert “or derelict”.

CTA 2009

26(1)Schedule 4 to CTA 2009 (index of expressions) is amended as follows.

(2)After the entry relating to “deposit back arrangements” insert—

(3)Omit the entries relating to “harm (in Part 14)” and “land (in Part 14)”.

(4)After the entry relating to “major interest (in Chapter 12 of Part 8)” insert—

(5)After the entry relating to “relevant consortium creditor relationship (in Chapter 7 of Part 5)” insert—

(6)After the entry relating to “relevant debits (in Part 8)” insert—

(7)Omit the references relating to “relevant land remediation (in Part 14)”, “sub-contractor payment (and sub-contractor) (in Chapter 6 of Part 14)” and “substance (in Part 14)”.

Part 3Commencement

27Any power to make orders which is conferred on the Treasury by virtue of an amendment of CTA 2009 made by this Schedule may be exercised at any time after this Act is passed; and any order made by virtue of any such amendment before 6 April 2010 may make provision having effect in relation to expenditure incurred on or after 1 April 2009.

28Subject to that, the amendments made by this Schedule have effect in relation to expenditure incurred on or after 1 April 2009; and for this purpose no account is to be taken of section 61 of CTA 2009 (earlier expenditure treated as incurred when trade started).

Section 27

SCHEDULE 8Venture capital schemes

Enterprise investment scheme

1Schedule 5B to TCGA 1992 (enterprise investment scheme: re-investment) is amended as follows.

2(1)Paragraph 1(2) (application of Schedule) is amended as follows.

(2)For paragraphs (g) and (h) substitute “and

(g)all of the money raised by the issue of the shares (other than any of them which are bonus shares) is, no later than the time mentioned in section 175(3) of ITA 2007, employed wholly for the purpose of that activity,”.

(3)In the words following the paragraphs, for “conditions in paragraphs (g) and (h) above do” substitute “condition in paragraph (g) above does”.

3(1)Paragraph 1A (failure of conditions of application) is amended as follows.

(2)In sub-paragraph (4)—

(a)omit “or (h)”, and

(b)for “sub-paragraph (4A) below” substitute “section 175(3) of ITA 2007”.

(3)Omit sub-paragraph (4A).

4(1)Paragraph 9 (other reconstructions and amalgamations) is amended as follows.

(2)For sub-paragraph (1) substitute—

“(1)This paragraph applies if section 135 or 136 (company reconstructions) applies in relation to shares to which deferral relief, but not relief under Part 5 of ITA 2007 (or Chapter 3 of Part 7 of the Taxes Act), is attributable.

(1A)Paragraphs 3 and 4 of this Schedule have effect as if section 135 or 136 did not apply in relation to the shares.”

(3)In sub-paragraph (2), for “Sub-paragraph (1) above shall not have effect to disapply section 135 or 136 where” substitute “Sub-paragraph (1A) does not apply if”.

(4)For sub-paragraph (3) substitute—

“(3)Sub-paragraph (1A) does not apply if paragraph 8 applies in relation to the shares.”

5In paragraph 16 (information), omit sub-paragraph (4A).

6(1)Section 158 of ITA 2007 (form and amount of EIS relief) is amended as follows.

(2)In subsection (4), omit—

(a)“Subject to subsection (5),”, and

(b)“before 6 October”.

(3)Omit subsection (5).

7(1)Section 175 of that Act (use of money raised requirement) is amended as follows.

(2)For subsection (1) substitute—

“(1)The requirement of this section is that all of the money raised by the issue of the relevant shares (other than any of them which are bonus shares) is, no later than the time mentioned in subsection (3), employed wholly for the purpose of the qualifying business activity for which it was raised.”

(3)In subsection (2), for “requirements in subsection (1)(a) and (b) do” substitute “requirement in subsection (1) does”.

(4)In subsection (3)—

(a)for “subsection (1)(a)” substitute “subsection (1)”, and

(b)for “12 months” (in both places) substitute “two years”.

Corporate venturing scheme

8(1)Paragraph 36 of Schedule 15 to FA 2000 (corporate venturing scheme: requirement as to money raised) is amended as follows.

(2)In sub-paragraph (1), for “At least 80%” substitute “All”.

(3)Omit sub-paragraph (1A).

(4)In sub-paragraph (1B), for “12 months” (in both places) substitute “two years”.

(5)In sub-paragraph (1C), for “Sub-paragraphs (1) and (1A) are” substitute “Sub-paragraph (1) is”.

(6)In sub-paragraph (5) omit “does not apply and the requirement of sub-paragraph (1A)”.

Venture Capital Trusts

9(1)Section 293 of ITA 2007 (use of money raised requirement) is amended as follows.

(2)For subsection (1) substitute—

“(1)The requirement of this section is that—

(a)less than two years has passed since the trading time, or

(b)at least two years has passed since the trading time and all of the money raised by the issue of the relevant holding has been employed wholly for the purposes of a relevant qualifying activity.”

(3)Omit subsections (2) to (4).

Consequential repeals

10In consequence of the amendments made by paragraphs 2, 3 and 5, omit—

(a)in FA 2001, in Schedule 15, paragraphs 26 to 28,

(b)in FA 2004, in Schedule 18, paragraph 13(1)(f), and

(c)in ITA 2007, in Schedule 1, paragraph 345(2)(b), (3)(a) and (13)(b).

Commencement

11The amendments made by paragraphs 2, 3, 5, 7, 8 and 10 have effect in relation to shares issued on or after 22 April 2009.

12The amendments made by paragraph 4 have effect in relation to—

(a)any exchange of shares to which section 135 of TCGA 1992 applies, where the new holding is issued on or after 22 April 2009, and

(b)any arrangement within section 136(1) of that Act entered into on or after that date.

13(1)The amendments made by paragraph 6 have effect as follows.

(2)The amendments made by sub-paragraph (2) have effect in relation to shares issued in the tax year 2009-10 or a subsequent tax year.

(3)The amendment made by sub-paragraph (3) has effect in relation to claims made under section 158(4) of ITA 2007 in respect of shares issued in the tax year 2009-10 or a subsequent tax year.

14The amendments made by paragraph 9 have effect in relation to shares or securities issued on or after 22 April 2009.

Section 28

SCHEDULE 9Group relief: preference shares

Amendments of Schedule 18 to ICTA

1Schedule 18 to ICTA (definitions relating to group relief) is amended as follows.

2(1)Paragraph 1 is amended as follows.

(2)In sub-paragraph (2), for “fixed-rate” substitute “relevant”.

(3)In sub-paragraph (3)—

(a)for “fixed-rate” substitute “relevant”,

(b)for paragraph (c) substitute—

“(c)either—

(i)do not carry a right to dividends, or

(ii)carry a right to dividends to which paragraph 1A applies; and”, and

(c)in paragraph (d), for “that new consideration” substitute “the new consideration received by the company in respect of the issue of the shares”.

3After that paragraph insert—

“1A(1)This paragraph applies to a right to dividends carried by shares in a company if—

(a)the dividends represent no more than a reasonable commercial return on the new consideration received by the company in respect of the issue of the shares, and

(b)condition A, B or C is met.

(2)Condition A is that—

(a)the dividends are of a fixed amount or at a fixed rate per cent of the nominal value of the shares, and

(b)the company is not entitled by virtue of any term subject to which the shares are issued or held to reduce the amount of, or not to pay, any of the dividends.

(3)Condition B is that—

(a)the dividends are of a rate per cent of the nominal value of the shares and the rate fluctuates in accordance with—

(i)a standard published rate of interest, or

(ii)the retail prices index, or any similar general index of prices which is published by the government, or by an agent of the government, of the country or territory in whose currency the shares are denominated, and

(b)the company is not entitled by virtue of any term subject to which the shares are issued or held to reduce the amount of, or not to pay, any of the dividends.

(4)Condition C is that condition A or B would be met but for sub-paragraph (2)(b) or (3)(b), and—

(a)the company is only entitled to reduce the amount of, or not to pay, any of the dividends in relevant circumstances, or

(b)having regard to all the circumstances, it is reasonable to assume that the company is only likely to reduce the amount of, or not to pay, any of the dividends in relevant circumstances.

(5)For the purposes of sub-paragraph (4) a company reduces the amount of, or does not pay, dividends “in relevant circumstances” if—

(a)at the time the dividend is or would be payable, the company is in severe financial difficulties, or

(b)it does so for the purpose of following a recommendation of a relevant regulatory body.

(6)The Treasury may by order specify circumstances in which a company is to be treated as in severe financial difficulties for the purposes of sub-paragraph (5)(a).

(7)In sub-paragraph (5)(b) “relevant regulatory body” means—

(a)in relation to a dividend paid by a company that is authorised for the purposes of the Financial Services and Markets Act 2000, the Financial Services Authority, and

(b)in relation to a dividend paid by any other company, a body discharging functions in relation to the company under the law of a country or territory outside the United Kingdom that correspond to functions discharged by the Financial Services Authority in relation to a company authorised as mentioned in paragraph (a).

(8)In this paragraph “new consideration” has the same meaning as in section 254.”

4In paragraph 5B(4)(b), for “fixed-rate” substitute “relevant”.

Commencement

5The amendments made by this Schedule have effect for accounting periods beginning on or after 1 January 2008.

Election to opt out of changes in relation to pre-existing etc shares

6If a company so elects, the amendments made by this Schedule do not have effect in relation to shares issued by the company—

(a)before 18 December 2008, or

(b)on or after that date under an agreement entered into before that date.

7An election under paragraph 6—

(a)must be made by the company by being included in its company tax return for the first accounting period of the company beginning on or after 1 January 2008 (and may be included in the return originally made or by amendment), and

(b)is irrevocable.

Paragraph 2(7) of Schedule 25 to ICTA

8The amendments made by this Schedule do not have effect for the purposes of paragraph 2(7) of Schedule 25 to ICTA (controlled foreign companies: definition of non-voting fixed-rate preference shares).

Section 29

SCHEDULE 10Sale of lessor companies etc: reforms

Introduction

1Schedule 10 to FA 2006 (sale etc of lessor companies etc) is amended as follows.

Paragraph 7

2(1)Paragraph 7 (provision for purposes of condition A in paragraph 6) is amended as follows.

(2)In sub-paragraph (8)(b), for “acquires any plant or machinery directly or indirectly from a person who is connected with the company” substitute “acquired any plant or machinery in circumstances in which this paragraph applies”.

(3)For sub-paragraph (9) substitute—

“(9)Paragraph (b) of sub-paragraph (8) above applies if—

(a)the relevant day falls on or after 22 March 2006,

(b)the plant or machinery was acquired directly or indirectly from a person who was connected with the company when the acquisition took place, and

(c)either the acquisition took place on or after 5 December 2005 or the person from whom the plant or machinery was so acquired was also connected with the company on that date.”

Paragraph 13A

3After paragraph 13 insert—

“No qualifying change of ownership where principal company’s interest in consortium company unchanged

13A(1)This paragraph applies if—

(a)a company (“company A”) is owned by a consortium, and

(b)a relevant change in the relationship between company A and a principal company of company A occurs on any day,

but the principal company’s interest in company A remains unchanged.

(2)For the purposes of this Schedule, there is no qualifying change of ownership in relation to company A on that day as a result of that change in that relationship.

(3)For the purposes of this paragraph the principal company’s interest in company A remains unchanged if the percentage of the ordinary share capital of company A that is beneficially owned directly or indirectly by the principal company is the same at the beginning and end of that day.

(4)Section 838(2) and (4) to (10) of ICTA apply for construing sub-paragraph (3).”

Paragraph 17

4(1)Paragraph 17 (meaning of “PM” in paragraph 16) is amended as follows.

(2)In sub-paragraph (7)(b), for “acquires any plant or machinery directly or indirectly from a person who is connected with the company” substitute “acquired any plant or machinery in circumstances in which this paragraph applies”.

(3)For sub-paragraph (8) substitute—

“(8)Paragraph (b) of sub-paragraph (7) above applies if—

(a)the relevant day falls on or after 22 March 2006,

(b)the plant or machinery was acquired directly or indirectly from a person who was connected with the company when the acquisition took place, and

(c)either the acquisition took place on or after 5 December 2005 or the person from whom the plant or machinery was so acquired was also connected with the company on that date.”

Paragraph 23

5In paragraph 23 (leasing business carried on by company in partnership: change in company’s interest in business), for sub-paragraph (6) substitute—

“(6)This paragraph is subject to paragraph 23A and is supplemented by paragraph 24.”

Paragraph 23A

6After that paragraph insert—

“23A(1)Paragraph 23 does not apply where conditions A, B and C are met.

(2)Condition A is that at the end of the relevant day none of the companies by which the business was carried on any longer have any share in the profits or loss of the business.

(3)Condition B is that, in consequence of what happens on the relevant day, the disposal value of all of the plant and machinery which was used for the purposes of the business and in respect of which capital allowances have been claimed is to be brought into account under section 61 of CAA 2001.

(4)Condition C is that the disposal value to be brought into account in relation to all of the plant or machinery is the price which the plant or machinery would fetch in the open market on that day.”

Paragraph 32

7(1)Paragraph 32 (leasing business carried on by a company in partnership: amount of expense) is amended as follows.

(2)In sub-paragraph (1)—

(a)in sub-paragraph (c), for “increases at any time on” substitute “is greater at the end of that day than at the start of”, and

(b)in sub-paragraph (d), omit “at that time” (in both places).

(3)For sub-paragraph (3) substitute—

“(3)The appropriate percentage is—

Paragraph 39

8(1)Paragraph 39 (relief for expense otherwise giving rise to carried forward loss) is amended as follows.

(2)In sub-paragraph (1)—

(a)in paragraph (c), insert at the end “or a later accounting period,”,

(b)in paragraph (d), after “company” insert “after the accounting period in which the loss is made”, and

(c)in paragraph (e), for “12 months beginning with” substitute “5 years beginning immediately after”.

(3)In subsection (1A)—

(a)in paragraph (b), for “, and” substitute “or a later accounting period,”,

(b)in paragraph (c), after “company” insert “after the accounting period in which the loss is made”, and

(c)after that paragraph insert “and

(d)the subsequent accounting period starts within the period of 5 years beginning with the day that is the relevant day within the meaning of paragraph 23(1) and does not start as a result of paragraph 3 or 33.”

(4)In sub-paragraph (2)—

(a)after “33” insert “or this sub-paragraph”, and

(b)for “an expense” substitute “giving rise to an expense of the relevant amount”.

(5)After that sub-paragraph insert—

“(2A)The relevant amount is the amount of the loss treated as an expense increased by—

(6)In sub-paragraph (3), after “The” insert “amount of the”.

(7)In sub-paragraph (4)—

(a)after “33” insert “or this paragraph”, and

(b)for “the expense under that paragraph” substitute “that expense”.

Commencement

9(1)The amendments made by paragraph 8 have effect in relation to losses incurred in accounting periods ending on or after 22 April 2009.

(2)The other amendments made by this Schedule have effect where the relevant day is on or after that date.

Section 30

SCHEDULE 11Tax relief for business expenditure on cars and motor cycles

Part 1Capital allowances

Plant and machinery allowances for cars and motor cycles

1Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.

2In section 38B (general exclusions from AIA qualifying expenditure), in general exclusion 2, for “81” substitute “268A”.

3In section 46(2) (general exclusions from first year allowances), in general exclusion 2, for “81” substitute “268A”.

4Omit sections 74 to 79 (cars above the cost threshold).

5Omit section 81 (extended meaning of “car”) and section 82 (qualifying hire cars).

6In section 84 (cases in which short-life asset treatment is ruled out), in the Table, in item 3, in the first column, for “81” substitute “268A”.

7(1)Section 104A (special rate expenditure) is amended as follows.

(2)In subsection (1)—

(a)in paragraph (a), after “the” insert “first”,

(b)omit “and” at the end of paragraph (c), and

(c)insert at the end “, and

(e)expenditure incurred on or after the second relevant date on the provision of a car that is not a main rate car.”

(3)In subsection (2), after “The” insert “first”.

(4)After that subsection insert—

“(3)The second relevant date is—

(a)for corporation tax purposes, 1 April 2009, and

(b)for income tax purposes, 6 April 2009.

(4)In this section—

• “car” has the meaning given in section 268A;

• “main rate car” has the meaning given in section 104AA.”

8After that section insert—

“104AAMeaning of “main rate car”

(1)“Main rate car” means—

(a)a car that is first registered before 1 March 2001,

(b)a car that has low CO₂ emissions, or

(c)a car that is electrically-propelled.

(2)For the purposes of this section a car has low CO₂ emissions if it meets conditions A and B.

(3)Condition A is that, when the car is first registered, it is so registered on the basis of a qualifying emissions certificate.

(4)Condition B is that the applicable CO₂ emissions figure in relation to the car does not exceed 160 grams per kilometre driven.

(5)The Treasury may by order amend the amount from time to time specified in subsection (4).

(6)An order under subsection (5) may contain transitional provision and savings.

(7)In this section—

• “applicable CO₂ emissions figure” and “qualifying emissions certificate” have the meanings given in section 268C;

• “car” has the meaning given in section 268A;

• “electrically-propelled” has the meaning given in section 268B.”

9After section 104E insert—

“104FSpecial rate cars: discontinued activity continued by relevant company

(1)This section applies if—

(a)a company (“the taxpayer”) has incurred special rate expenditure within section 104A(1)(e) (expenditure on a car other than a main rate car) to which section 104C applies (allocation to special rate pool),

(b)the qualifying activity carried on by the taxpayer is permanently discontinued, and

(c)conditions A, B and C are met.

(2)Condition A is that the qualifying activity carried on by the taxpayer consisted of or included (other than incidentally) making cars available to other persons.

(3)Condition B is that, at any time in the 6 months after the taxpayer’s qualifying activity is permanently discontinued, the qualifying activity of a group relief company consists of or includes (other than incidentally) making cars available to other persons.

(4)Condition C is that the balancing allowance (“SBA”) to which the taxpayer would be entitled (but for this section) in respect of the special rate pool is greater than—

For the purposes of this section if BC − OBA is a negative amount it is to be treated as if it were nil.

(5)The balancing allowance to which the taxpayer is entitled in respect of the special rate pool is reduced to an amount equal to BC — OBA.

(6)The relevant company is to be treated as having incurred qualifying expenditure within section 104A(1)(e) (“notional expenditure”), whether or not the relevant company owns cars previously owned by the taxpayer.

(7)The amount of the notional expenditure is an amount equal to the amount by which SBA exceeds BC — OBA.

(8)The relevant company is to be treated as having incurred the notional expenditure on the day after the end of the taxpayer’s final chargeable period.

(9)If part of the chargeable period in which the relevant company is treated as incurring expenditure under this section (“the acquisition period”) overlaps with the taxpayer’s penultimate chargeable period—

(a)the part of the expenditure which is proportional to that part of the acquisition period is not to be taken into account in determining the relevant company’s available qualifying expenditure for the acquisition period, but

(b)this does not prevent that part of the expenditure being taken into account in determining the relevant company’s available qualifying expenditure for any subsequent chargeable period.

(10)In this section—

• “car” has the meaning given in section 268A;

• “company” means any body corporate;

• “group relief company” means—

  (a)

  a company to which group relief under Chapter 4 of Part 10 of ICTA would be available (on the making of a claim) in respect of balancing allowances surrendered by the taxpayer in the taxpayer’s final chargeable period, and

  (b)

  a company to which such relief would be available (on the making of a claim) in respect of balancing allowances surrendered by a company within paragraph (a);

• “main rate car” has the meaning given in section 104AA;

• “penultimate chargeable period” means the chargeable period preceding the final chargeable period;

• “the relevant company” means the group relief company mentioned in subsection (3) or, if there is more than one, the one—

  (a)

  nominated by the taxpayer not more than 6 months after the end of the taxpayer’s final chargeable period, or

  (b)

  in the absence of such a nomination, nominated by Her Majesty’s Revenue and Customs.”

10After section 208 insert—

“208ACars: disposal value in avoidance cases

(1)This section applies if—

(a)a disposal value is required to be brought into account under section 61,

(b)the disposal event is that the person ceases to own a section 206 car because of a sale or the performance of a contract, and

(c)allowances under this Part in respect of the person’s expenditure under that transaction are restricted under section 217 or 218 (anti-avoidance).

(2)A car is a section 206 car if expenditure on the provision of the car is required to be allocated to a single asset pool under that section.

(3)The disposal value to be brought into account is—

(a)the market value of the car at the time of the disposal event, or

(b)if less, the capital expenditure incurred, or treated as incurred, on the provision of the car by the person disposing of it.

(4)The person acquiring the car is to be treated as having incurred capital expenditure on its provision of an amount equal to the disposal value required to be brought into account under subsection (3).

(5)In this section “car” has the meaning given in section 268A.”

11After section 268 insert—

“Cars etc

268AMeaning of “car” and “motor cycle”

(1)In this Part “car” means a mechanically propelled road vehicle other than—

(a)a motor cycle,

(b)a vehicle of a construction primarily suited for the conveyance of goods or burden of any description, or

(c)a vehicle of a type not commonly used as a private vehicle and unsuitable for such use.

(2)In this Part “motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988.

268BElectrically-propelled vehicles

For the purposes of this Part a vehicle is electrically-propelled only if—

(a)it is propelled solely by electrical power, and

(b)that power is derived from—

(i)a source external to the vehicle, or

(ii)an electrical storage battery which is not connected to any source of power when the vehicle is in motion.

268CTerms relating to emissions

(1)In this Part “qualifying emissions certificate”, in relation to a vehicle, means an EC certificate of conformity, or a UK approval certificate, that specifies—

(a)in the case of a vehicle other than a bi-fuel vehicle, a CO₂ emissions figure in terms of grams per kilometre driven, or

(b)in the case of a bi-fuel vehicle, separate CO₂ emissions figures in terms of grams per kilometre driven for different fuels.

(2)For the purposes of this Part, in relation to a vehicle other than a bi-fuel vehicle, the applicable CO₂ emissions figure is—

(a)where the qualifying emissions certificate specifies only one CO₂ emissions figure, that figure, and

(b)where the certificate specifies more than one CO₂ emissions figure, the figure specified as the CO₂ emissions (combined) figure.

(3)For the purposes of this Part, in relation to a bi-fuel vehicle, the applicable CO₂ emissions figure is—

(a)where the qualifying emissions certificate specifies more than one CO₂ emissions figure in relation to each fuel, the lowest CO₂ emissions (combined) figure specified, and

(b)in any other case, the lowest CO₂ figure specified by the certificate.

(4)In this section—

• “bi-fuel”, in relation to a vehicle, means capable of being propelled by—

  (a)

  petrol and road fuel gas, or

  (b)

  diesel and road fuel gas;

• “diesel” means any diesel fuel within the definition in Article 2 of Directive 98/70/EC of the European Parliament and of the Council;

• “EC certificate of conformity” means a certificate of conformity issued by a manufacturer under any provision of the law of a member State implementing Article 6 of Council Directive 70/156/EEC, as amended;

• “petrol” has the meaning given by Article 2 of Directive 98/70/EC of the European Parliament and of the Council;

• “road fuel gas” has the same meaning as in section 171(1) of ITEPA 2003;

• “UK approval certificate” means a certificate issued under—

  (a)

  section 58(1) or (4) of the Road Traffic Act 1988, or

  (b)

  Article 31A(4) or (5) of the Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154 (N.I. 1)).”

Consequential amendments of CAA 2001

12CAA 2001 is amended as follows.

13In section 33 (personal security), omit subsection (7).

14(1)Section 45D (expenditure on cars with low carbon dioxide emissions) is amended as follows.

(2)In subsection (1), for paragraph (c) substitute—

“(c)the car—

(i)is electrically-propelled, or

(ii)has low CO₂ emissions, and”.

(3)In subsection (2), for “a car with low CO₂ emissions is a car which” substitute “a car has low CO₂ emissions if it”.

(4)In subsection (3), for the words from “an EC certificate” to the end substitute “a qualifying emissions certificate.”

(5)In subsection (4), for “in the case of” substitute “in relation to”.

(6)Omit subsections (5) and (6).

(7)In subsection (8)—

(a)after “car” insert “is to a car within the meaning of section 268A, except that it”, and

(b)omit paragraph (b) (and the “but” before it).

(8)Omit subsections (9) and (10).

(9)After subsection (10) insert—

“(11)In this section—

• “applicable CO₂ emissions figure” and “qualifying emissions certificate” have the meanings given in section 268C;

• “electrically-propelled” has the meaning given in section 268B.”

15In section 54(3) (single asset pools), omit “section 74 (car above the cost threshold)”.

16In section 55(6) (determination of entitlement or liability), after “subject to” insert “section 104F (special rate cars: discontinued activity continued by relevant company) and”.

17In section 65(3) (the final chargeable period), for “sections 77(1) and” substitute “section”.

18In section 66 (list of provisions about disposal values)—

(a)omit the entry in the list relating to section 79, and

(b)insert at the appropriate place—

19(1)In section 84 (cases in which short-life asset treatment is ruled out), the Table is amended as follows.

(2)In item 3, for the words in the second column substitute “The car is a hire car for a disabled person (as defined by section 268D).”

(3)In item 4, in the second column, insert “The expenditure is incurred on the provision of a car which is a hire car for a disabled person (as defined by section 268D)”.

(4)In item 5, in the second column, for “within section 82(4) (cars hired out to persons receiving disability allowances etc)” substitute “a hire car for a disabled person (as defined by section 268D)”.

20(1)Section 86 (short-life assets) is amended as follows.

(2)In subsection (2)(b), for “main pool” substitute “appropriate pool”.

(3)After subsection (4) insert—

“(5)In subsection (2)(b) “appropriate pool” means—

(a)in the case of expenditure incurred on the provision of a car that is not a main rate car (as defined by section 104AA), the special rate pool, and

(b)in any other case, the main pool.”

21In section 96 (expenditure on cars excluded from being long-life asset expenditure), for “car (as defined by section 81)” substitute “car or motor cycle (as defined by section 268A)”.

22After section 268C (inserted by this Part of this Schedule) insert—

“268DHire cars for disabled persons

(1)For the purposes of this Part a car is a hire car for a disabled person if it is provided wholly or mainly for hire to, or the carriage of, disabled persons in the ordinary course of a trade.

(2)“Disabled person” means a person in receipt of—

(a)a disability living allowance under—

(i)the Social Security Contributions and Benefits Act 1992, or

(ii)the Social Security Contributions and Benefits (Northern Ireland) Act 1992,

because of entitlement to the mobility component,

(b)a mobility supplement under a scheme made under the Personal Injuries (Emergency Provisions) Act 1939,

(c)a mobility supplement under an Order in Council made under section 12 of the Social Security (Miscellaneous Provisions) Act 1977, or

(d)a payment that appears to the Treasury to be similar to those mentioned in paragraphs (a) to (c) and that is specified by order made by the Treasury.”

23(1)Part 2 of Schedule 1 (defined expressions) is amended as follows.

(2)In the entry relating to “car (in Part 2)”, for “section 81” substitute “section 268A”.

(3)Insert at the appropriate places—

24In Schedule 3 (transitionals and savings), omit paragraph 19 (cars above the cost threshold) and the headings immediately before it.

Consequential repeal

25In consequence of the amendments made by this Part of this Schedule, in FA 2002, in Schedule 19, omit paragraph 6.

Commencement and transitionals: introduction

26For the purposes of this Part of this Schedule—

(a)the first relevant date is—

(i)for corporation tax purposes, 1 April 2009, and

(ii)for income tax purposes, 6 April 2009,

(b)the second relevant date is—

(i)for corporation tax purposes, 1 August 2009, and

(ii)for income tax purposes, 6 August 2009, and

(c)the third relevant date is—

(i)for corporation tax purposes, 1 April 2014, and

(ii)for income tax purposes, 6 April 2014.

27(1)For the purposes of this Part of this Schedule “new expenditure” means—

(a)expenditure incurred on or after the first relevant date, and

(b)expenditure incurred before that date to which sub-paragraph (2) applies,

and expenditure that is not new expenditure is “old expenditure”.

(2)This sub-paragraph applies to expenditure if—

(a)it is incurred under an agreement for the provision of a car entered into after 8 December 2008, and

(b)under that agreement the car is not required to be made available before the second relevant date.

(3)For the purposes of sub-paragraph (2) an agreement is entered into on the date on which the following conditions are met—

(a)there is a contract in writing for the provision of the car,

(b)the contract is unconditional or, if it is conditional, the conditions have been met, and

(c)no terms remain to be agreed.

Commencement

28(1)The amendments made by this Part of this Schedule have effect in relation to new expenditure (subject to sub-paragraph (2)).

(2)The repeal of section 79 of CAA 2001 and the amendments made by paragraphs 10 and 18 have effect in cases in which a person ceases to own a car or motor cycle if the expenditure incurred on the provision of the car or motor cycle is new expenditure.

29(1)The repeal of sections 74 to 78 of CAA 2001 and the amendments made by paragraphs 15 and 17 have effect in relation to old expenditure, but only for chargeable periods beginning on or after the third relevant date.

(2)The repeal of section 79 of CAA 2001 and the amendment made by paragraph 18(a) have effect in cases in which a person ceases to own a car or motor cycle if the expenditure incurred on the provision of the car or motor cycle is old expenditure, but only for chargeable periods beginning on or after the third relevant date.

Transitionals

30(1)This paragraph applies where expenditure incurred by a person on the provision of a car or motor cycle includes both new expenditure and old expenditure.

(2)The new expenditure and the old expenditure are to be treated as if they were incurred on the provision of separate (but identical) cars or motor cycles.

(3)Any amount required to be brought into account in connection with a disposal event in respect of the car or motor cycle mentioned in sub-paragraph (1) is to be apportioned on a just and reasonable basis.

31(1)This paragraph applies where—

(a)old expenditure is required to be allocated to a single asset pool by section 74 of CAA 2001,

(b)there is unrelieved expenditure in that pool at the end of a transitional chargeable period, and

(c)the unrelieved expenditure is not required to be allocated to a single asset pool by any other provision of Part 2 of that Act.

(2)The unrelieved expenditure must be carried forward to the main pool.

(3)A “transitional chargeable period” is one that begins before the third relevant date and ends on or after the day before the third relevant date.

32An order made under section 82(4)(d) of CAA 2001 (qualifying hire cars for disabled persons) before the day on which this Act is passed (and not revoked before that day) has effect as if it had also been made under section 268D(2)(d) of that Act (hire cars for disabled persons) (inserted by this Part of this Schedule).

Interpretation

33In this Part of this Schedule—

(a)“car” and “motor cycle” have the meaning given in section 268A of CAA 2001 (inserted by paragraph 11), and

(b)other expressions used in this Part of this Schedule and in Part 2 of CAA 2001 have the same meaning here as in that Part of that Act.

Part 2Restrictions on deductions for hire expenses

Income tax

34ITTOIA 2005 is amended as follows.

35In section 31(1)(b) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”.

36(1)Section 48 (rules restricting deductions from profits: car or motor cycle hire) is amended as follows.

(2)In subsection (1), for the words from “or motor cycle”, in the first place, to the end substitute “which is not—

(a)a car that is first registered before 1 March 2001,

(b)a car that has low CO₂ emissions,

(c)a car that is electrically propelled, or

(d)a qualifying hire car.”

(3)In subsection (2), for the words from “multiplying” to the end substitute “15%”.

(4)In subsection (4), for “multiplying it by the fraction in subsection (2)” substitute “15%”.

(5)In subsection (4A)(a), (b) and (c), omit “or motor cycle”.

(6)Omit subsection (5).

(7)In the heading, omit “or motor cycle”.

37(1)Section 49 (car or motor cycle hire: supplementary) is amended as follows.

(2)In subsection (1)—

(a)omit “or motor cycle”,

(b)omit “one”,

(c)before paragraph (a) insert—

“(za)a motor cycle (within the meaning of section 185(1) of the Road Traffic Act 1988),”, and

(d)in paragraphs (a) and (b), insert at the beginning “a vehicle”.

(3)After that subsection insert—

“(1A)In section 48—

• “a car that has low CO₂ emissions” has the same meaning as in section 104AA of CAA 2001 (special rate expenditure: main rate car);

• “electrically propelled” has the meaning given in section 268B of that Act.”

(4)In subsection (2)—

(a)omit “or motor cycle” (in each place),

(b)omit paragraph (c), and

(c)insert at the end—

“(d)is leased under a long-funding lease (within the meaning of section 70G of CAA 2001).”

(5)In subsection (6), omit “and section 48”.

(6)In the heading, omit “or motor cycle”.

38Omit section 50 (hiring cars with low carbon dioxide emissions).

39After that section insert—

“50AShort-term hiring in and long-term hiring out

(1)Section 48 does not apply to expenses incurred by a person (“the taxpayer”) on the hiring of a car if condition A or B is met.

(2)Condition A is that—

(a)the expenses are incurred in respect of the making available of the car to the taxpayer for a period (“the hire period”) of not more than 45 consecutive days, and

(b)if the car is made available to the taxpayer (whether by the same person or different persons) for one or more periods linked to the hire period, the hire period and the linked period or periods, taken together, consist of not more than 45 days.

(3)Condition B is that the expenses are incurred in respect of a period (“the sub-hire period”) throughout which the taxpayer makes the car available to another person (“the customer”) and—

(a)the sub-hire period consists of more than 45 consecutive days, or

(b)if the taxpayer makes the car available to the customer throughout one or more periods linked to the sub-hire period, the sub-hire period and the linked period or periods, taken together, consist of more than 45 days,

but see subsection (4).

(4)Condition B is not met if—

(a)the customer is an employee of the taxpayer or of a person connected with the taxpayer, or

(b)during all or part of the sub-hire period (or any period linked to the sub-hire period), the customer makes any car available to an employee of the taxpayer under arrangements with the taxpayer or with a person connected with the taxpayer.

(5)Neither condition A nor condition B is met if the car is hired under arrangements the purpose, or one of the main purposes, of which is—

(a)to disapply or reduce the effect of section 48, or

(b)other avoidance of tax.

(6)For the purposes of condition B the expenses incurred by the taxpayer on the hiring of the car must be apportioned between—

(a)the sub-hire period, and

(b)the remainder of the period during which the car is made available to the taxpayer,

according to the respective lengths of those periods.

(7)A period of consecutive days (“the main period”) is linked to—

(a)a period of consecutive days that ends not more than 14 days before the main period begins,

(b)a period of consecutive days that begins not more than 14 days after the main period ends, and

(c)a period of consecutive days linked to a period in paragraph (a) or (b).

(8)For the purposes of this section, where arrangements for the hiring of a car include arrangements for the provision of a replacement car in the event that the first car is not available, the first car and any replacement car are to be treated as if they were the same car.

(9)In this section (and section 50B) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions.

50BConnected persons: application of section 48

(1)This section applies where connected persons incur expenses on the hiring of the same car for the same period and—

(a)section 48 would (but for this section) apply to the expenses of two or more of those persons, or

(b)section 48 and section 56 of CTA 2009 would (but for this section and section 58B of that Act) each apply to the expenses of at least one of those persons.

(2)This section only applies where one or more of the persons mentioned in subsection (1)(a) or (b) incurs the expenses under commercial arrangements (and such a person is referred to below as a “commercial lessee”).

(3)In relation to the expenses mentioned in subsection (1) to which section 48 would (but for this section) apply, section 48 only applies to the following—

(a)where there is one commercial lessee, any such expenses incurred by that lessee, and

(b)where there is more than one, any such expenses incurred by the first commercial lessee in the chain of arrangements for the hiring of the car for the period.

(4)In this section—

(a)references to expenses incurred by a commercial lessee include expenses incurred in that or any other capacity, and

(b)“commercial arrangements” means arrangements the terms of which are such as would reasonably have been expected if the parties to the arrangements had been dealing at arm’s length.”

40In section 247(1) (other rules about what counts as post-cessation receipts), omit “or motor cycle”.

41In section 272(2) (profits of a property business: application of trading income rules), in the entry in the Table relating to sections 48 to 50—

(a)for “50” substitute “50B”, and

(b)omit “or motor cycle”.

42In section 274(1)(b) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”.

43In section 354(2) (other rules about what counts as post-cessation receipts), omit “or motor cycle”.

44In Schedule 2 (transitionals and savings), omit paragraphs 16 and 17 (and the heading before them).

Corporation tax

45CTA 2009 is amended as follows.

46In section 51(1)(b)(i) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”.

47(1)Section 56 (rules restricting deductions from profits: car or motor cycle hire) is amended as follows.

(2)In subsection (1), for the words from “or motor cycle”, in the first place, to the end substitute “which is not—

(a)a car that is first registered before 1 March 2001,

(b)a car that has low CO₂ emissions,

(c)a car that is electrically propelled, or

(d)a qualifying hire car.”

(3)In subsection (2), for the words from “multiplying” to the end substitute “15%”.

(4)In subsection (4), for “multiplying it by the fraction in subsection (2)” substitute “15%”.

(5)In subsection (5)(a), (b) and (c), omit “or motor cycle”.

(6)Omit subsection (6).

(7)In the heading, omit “or motor cycle”.

48(1)Section 57 (car or motor cycle hire: supplementary) is amended as follows.

(2)In subsection (1)—

(a)omit “or motor cycle”,

(b)omit “one”,

(c)before paragraph (a) insert—

“(za)a motor cycle (within the meaning of section 185(1) of the Road Traffic Act 1988),”, and

(d)in paragraphs (a) and (b), insert at the beginning “a vehicle”.

(3)After that subsection insert—

“(1A)In section 56—

• “a car that has low CO₂ emissions” has the same meaning as in section 104AA of CAA 2001 (special rate expenditure: main rate car);

• “electrically propelled” has the meaning given in section 268B of that Act.”

(4)In subsection (2)—

(a)omit “or motor cycle” (in each place),

(b)omit paragraph (c), and

(c)insert at the end—

“(d)is leased under a long-funding lease (within the meaning of section 70G of CAA 2001).”

(5)In subsection (6), omit “and section 56”.

(6)In the heading, omit “or motor cycle”.

49Omit section 58 (hiring cars with low CO₂ emissions before 1 April 2013).

50After section 58 insert—

“58AShort-term hiring in and long-term hiring out

(1)Section 56 does not apply to expenses incurred by a company (“the taxpayer”) on the hiring of a car if condition A or B is met.

(2)Condition A is that—

(a)the expenses are incurred in respect of the making available of the car to the taxpayer for a period (“the hire period”) of not more than 45 consecutive days, and

(b)if the car is made available to the taxpayer (whether by the same person or different persons) for one or more periods linked to the hire period, the hire period and the linked period or periods, taken together, consist of not more than 45 days.

(3)Condition B is that the expenses are incurred in respect of a period (“the sub-hire period”) throughout which the taxpayer makes the car available to another person (“the customer”) and—

(a)the sub-hire period consists of more than 45 consecutive days, or

(b)if the taxpayer makes the car available to the customer throughout one or more periods linked to the sub-hire period, the sub-hire period and the linked period or periods, taken together, consist of more than 45 days,

but see subsection (4).

(4)Condition B is not met if—

(a)the customer is an employee or officer of the taxpayer or of a person connected with the taxpayer, or

(b)during all or part of the sub-hire period (or any period linked to the sub-hire period), the customer makes any car available to an employee or officer of the taxpayer under arrangements with the taxpayer or with a person connected with the taxpayer.

(5)Neither condition A nor condition B is met if the car is hired under arrangements the purpose, or one of the main purposes, of which is—

(a)to disapply or reduce the effect of section 56, or

(b)other avoidance of tax.

(6)For the purposes of condition B the expenses incurred by the taxpayer on the hiring of the car must be apportioned between—

(a)the sub-hire period, and

(b)the remainder of the period during which the car is made available to the taxpayer,

according to the respective lengths of those periods.

(7)A period of consecutive days (“the main period”) is linked to—

(a)a period of consecutive days that ends not more than 14 days before the main period begins,

(b)a period of consecutive days that begins not more than 14 days after the main period ends, and

(c)a period of consecutive days linked to a period in paragraph (a) or (b).

(8)For the purposes of this section, where arrangements for the hiring of a car include arrangements for the provision of a replacement car in the event that the first car is not available, the first car and any replacement car are to be treated as if they were the same car.

(9)In this section (and section 58B) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable and whether involving a single transaction or two or more transactions.

58BConnected persons: application of section 56

(1)This section applies where connected persons incur expenses on the hiring of the same car for the same period and—

(a)section 56 would (but for this section) apply to the expenses of two or more of those persons, or

(b)section 56 and section 48 of ITTOIA 2005 would (but for this section and section 50B of that Act) each apply to the expenses of at least one of those persons.

(2)This section only applies where one or more of the persons mentioned in subsection (1)(a) or (b) incurs the expenses under commercial arrangements (and such a person is referred to below as a “commercial lessee”).

(3)In relation to the expenses mentioned in subsection (1) to which section 56 would (but for this section) apply, section 56 only applies to the following—

(a)where there is one commercial lessee, any such expenses incurred by that lessee, and

(b)where there is more than one, any such expenses incurred by the first commercial lessee in the chain of arrangements for the hiring of the car for the period.

(4)In this section—

(a)references to expenses incurred by a commercial lessee include expenses incurred in that or any other capacity, and

(b)“commercial arrangements” means arrangements the terms of which are such as would reasonably have been expected if the parties to the arrangements had been dealing at arm’s length.”

51In section 191(1) (other rules about what counts as post-cessation receipts), omit “or motor cycle”.

52In section 210(2) (profits of a property business: application of trading income rules), in the entry in the Table relating to sections 56 to 58—

(a)for “58” substitute “58B”, and

(b)omit “or motor cycle”.

53In section 214(1)(b)(i) (relationship between rules prohibiting and allowing deductions), omit “or motor cycle”.

54In section 283(2) (other rules about what counts as post-cessation receipts), omit “or motor cycle”.

55In section 865(3)(a) (debits for expenditure not generally deductible for tax purposes), omit “or motor cycle”.

56In section 1231(3) (absence of accounts), omit “or motor cycle”.

57(1)Section 1251 (car or motor cycle hire: companies with investment business) is amended as follows.

(2)In subsection (1), for the words from “or motor cycle”, in the first place, to the end substitute “which is not—

(a)a car that is first registered before 1 March 2001,

(b)a car that has low CO₂ emissions,

(c)a car that is electrically propelled, or

(d)a qualifying hire car.”

(3)In subsection (2), for the words from “multiplying” to the end substitute “15%”.

(4)In subsection (4)(b), for “multiply that amount by the fraction set out in subsection (2) above” substitute “reduce that amount by 15%”.

(5)In subsection (5)(a), (b) and (c), omit “or motor cycle”.

(6)Omit subsection (6).

(7)In subsection (7)—

(a)omit “or motor cycle”, and

(b)for “58 (hiring cars with low CO₂ emissions before 1 April 2013)” substitute “58A (short-term hiring in and long-term hiring out)”.

(8)After that subsection insert—

“(8)For the purposes of section 58B of this Act and section 50B of ITTOIA 2005 (connected persons: application of restrictions), this section is to be treated as if it were part of section 56 of this Act.”

(9)In the heading, omit “or motor cycle”.

58In Schedule 2 (transitionals and savings), omit paragraphs 16 and 17 (and the heading before them).

59ICTA is amended as follows.

60(1)Section 76ZN (car or motor cycle hire: expenses of insurance companies) is amended as follows.

(2)In subsection (1)—

(a)in paragraph (a), omit “or motor cycle”, and

(b)for paragraphs (b) and (c) substitute—

“(b)the car is not—

(i)a car that is first registered before 1 March 2001,

(ii)a car that has low CO₂ emissions (as defined in section 104AA of the Capital Allowances Act),

(iii)a car that is electrically propelled (as defined in section 268B of that Act), or

(iv)a qualifying hire car.”

(3)After that subsection insert—

“(1A)Subsection (2) does not apply if condition A or condition B in section 58A of CTA 2009 (short-term hiring in and long-term hiring out) is met.”

(4)In subsection (2), for the words from “multiplying” to the end substitute “15%”.

(5)In subsection (5), for the words from “multiplying” to the end substitute “15%”.

(6)In subsection (6)(a), (b) and (c), omit “or motor cycle”.

(7)Omit subsection (7).

(8)In subsection (8), omit “or motor cycle” (in both places).

(9)After that subsection insert—

“(9)For the purposes of section 50B of ITTOIA 2005 and section 58B of CTA 2009 (connected persons: application of restrictions), this section is to be treated as if it were part of section 56 of CTA 2009.”

61Omit section 76ZO (hiring cars (but not motor cycles) with low CO₂ emissions before 1 April 2013).

62(1)Section 578A (rules restricting deductions: car or motor cycle hire) is amended as follows.

(2)In subsection (2), for paragraphs (a) and (b) substitute “which is not—

(a)a car that is first registered before 1 March 2001,

(b)a car that has low CO₂ emissions (as defined in section 104AA of the Capital Allowances Act),

(c)a car that is electrically propelled (as defined in section 268B of that Act), or

(d)a qualifying hire car.”

(3)Omit subsections (2A) and (2B).

(4)After subsection (2B) insert—

“(2C)This section does not apply to the hiring of a car where condition A or condition B in section 58A of CTA 2009 (short-term hiring in and long-term hiring out) is met.”

(5)In subsection (3), for the words from “multiplying” to the end substitute “15%”.

(6)In subsection (4), for “multiplying it by the fraction in subsection (3) above” substitute “15%”.

(7)After that subsection insert—

“(5)For the purposes of section 50B of ITTOIA 2005 (connected persons: application of restrictions), this section is to be treated as if it were part of section 48 of that Act.”

63(1)Section 578B (expenditure on car or motor cycle hire: supplementary) is amended as follows.

(2)In subsection (1)—

(a)omit “one”,

(b)before paragraph (a) insert—

“(za)a motor cycle (within the meaning of section 185(1) of the Road Traffic Act 1988),”,

(c)in paragraphs (a) and (b), insert at the beginning “a vehicle”, and

(d)omit the words after paragraph (b).

(3)In subsection (2)—

(a)omit paragraph (b), and

(b)insert at the end—

“(c)it is leased under a long-funding lease (within the meaning of section 70G of the Capital Allowances Act).”

(4)In subsection (3), omit “section 578A and”.

(5)Omit subsection (4).

Consequential repeals

64In consequence of the amendments made by this Part of this Schedule, omit—

(a)in FA 2008, section 77(4)(b), and

(b)in CTA 2009, in Schedule 1, paragraph 45.

Commencement

65For the purposes of this Part of this Schedule—

(a)the first relevant date is—

(i)for corporation tax purposes, 1 April 2009, and

(ii)for income tax purposes, 6 April 2009, and

(b)the second relevant date is—

(i)for corporation tax purposes, 1 April 2010, and

(ii)for income tax purposes, 6 April 2010, and

66(1)The amendments made by this Part of this Schedule have effect in relation to deductions for expenses incurred on the hiring of a car or motor cycle under an agreement under which the hire period begins on or after the first relevant date (but see paragraph 67).

(2)For the purposes of this paragraph and paragraph 67, the hire period, in relation to an agreement, begins on the first day on which the car or motor cycle is required to be made available for use under the agreement.

Election for new regime not to apply in certain cases

67(1)This paragraph applies where—

(a)a person incurs expenses on the hiring of a car or motor cycle under an agreement entered into on or before 8 December 2008, and

(b)the hire period begins before the second relevant date.

(2)If the person makes an election under this paragraph, none of the amendments made by this Part of this Schedule has effect in relation to any deduction for expenses incurred by the person on the hiring of the car or motor cycle under the agreement.

(3)The election must be made by notice given to an officer of Revenue and Customs—

(a)for income tax purposes, on or before the normal time limit for amending a tax return for the tax year in which the relevant chargeable period ends, and

(b)for corporation tax purposes, no later than 2 years after the end of the relevant chargeable period.

(4)“The relevant chargeable period” means the first chargeable period (as defined in section 6 of CAA 2001) in which any expenditure by the person on the provision of the car or motor cycle under the agreement was incurred.

(5)The election is irrevocable.

(6)All such assessments and adjustments of assessments are to be made as are necessary to give effect to the election.

(7)For the purpose of this paragraph, an agreement is entered into on the first date on which the following conditions are met—

(a)there is a contract in writing for the use of the car or motor cycle by the person,

(b)the contract is unconditional or, if it is conditional, the conditions have been met, and

(c)no terms remain to be agreed.

Saving

68The repeal of section 82 of CAA 2001 (meaning of “qualifying hire car”) by Part 1 of this Schedule does not affect the continued operation of the following provisions until they are repealed by this Part of this Schedule—

(a)section 578B(2)(b) of ICTA,

(b)section 49(2)(c) of ITTOIA 2005, and

(c)section 57(2)(c) of CTA 2009.

Section 31

SCHEDULE 12Reallocation of chargeable gain or loss within a group

Main provisions

1In TCGA 1992, for section 171A substitute—

“171AElection to reallocate gain or loss to another member of the group

(1)This section applies where—

(a)a chargeable gain or an allowable loss accrues to a company (“company A”) in respect of an asset (or would so accrue but for an election under this section),

(b)at the time of accrual, company A and another company (“company B”) are members of the same group, and

(c)had company A disposed of the asset to company B immediately before the time of accrual, section 171(1) would have applied.

(2)In determining for the purposes of subsection (1)(c) whether subsection (1) of section 171 would have applied, it is to be assumed that subsection (1A)(b) of that section read—

“(b)that, at the time of the disposal, company B is resident in the United Kingdom, or carrying on a trade in the United Kingdom through a permanent establishment there.”

(3)In this section “the time of accrual” means the time the chargeable gain or allowable loss accrues to company A (or would so accrue but for an election under this section).

(4)Companies A and B may make a joint election to transfer the chargeable gain or allowable loss, or such part of it as is specified in the election, from company A to company B.

(5)An election under this section must be made—

(a)by notice to an officer of Revenue and Customs, and

(b)no later than two years after the end of the accounting period of company A in which the time of accrual falls.

(6)An election, or two or more elections made simultaneously, is or are of no effect if, taken together with each earlier election (if any) made in respect of the same gain or loss, it or they would (apart from this subsection) have effect in relation to an amount exceeding the gain or loss.

(7)This section does not apply in relation to a chargeable gain or allowable loss that accrues by virtue of section 179.

For provision as to the reallocation within a group of gains and losses arising on such a disposal, see section 179A.

(8)For the effect of an election under this section, see section 171B.

171BElection under section 171A: effect

(1)This section applies where an election is made under section 171A.

(2)The effect of the election is that the chargeable gain or allowable loss, or such amount of it as is specified in the election, is treated as accruing not to company A but to company B.

(3)The gain or loss treated as accruing to company B is to be taken to accrue at the time that, had the election not been made, it would have accrued to company A.

(4)Where company B is not resident in the United Kingdom, the gain or loss treated as accruing to it is to be taken to accrue in respect of a chargeable asset held by it.

(5)For this purpose an asset is a “chargeable asset” in relation to a company at any time if any gain accruing to the company on a disposal of the asset by the company at that time would be a chargeable gain and would by virtue of section 10B form part of its chargeable profits for corporation tax purposes.

(6)Any payment made by company A to company B or by company B to company A, in pursuance of an agreement between them in connection with the election—

(a)is not to be taken into account in computing profits or losses of either company for corporation tax purposes, and

(b)is not for any purposes of the Corporation Tax Acts to be regarded as a distribution,

provided it does not exceed the amount of the chargeable gain or allowable loss that is treated, as a result of the election, as accruing to company B.

171CElections under section 171A: insurance companies

(1)This section applies where —

(a)an election is made under section 171A in relation to a gain or loss, and

(b)company B is an insurance company.

(2)For the purposes of section 171A(1)(c), section 440(3) of the Taxes Act (disposals of certain assets by and to insurance companies to fall outside the rule in section 171) is to be disregarded.

(3)Subsection (2) does not apply if—

(a)company A is an insurance company, and

(b)the gain or loss arose in respect of the disposal of an asset that, immediately before the disposal, was part of that company’s long-term insurance fund.

(4)The chargeable gain or allowable loss treated as accruing to company B as a result of the election is to be treated as arising in respect of an asset that is not part of company B’s long-term insurance fund.

(5)In this section “insurance company” and “long-term insurance fund” have the same meaning as in Chapter 1 of Part 12 of the Taxes Act (see section 431(2) of that Act).”

Consequential amendments

2In section 179A of TCGA 1992 (reallocation within group of gain or loss accruing under section 179), for subsection (5) substitute—

“(5)An election, or two or more elections made simultaneously, is or are of no effect if, taken together with each earlier election (if any) made in respect of the same gain or loss, it or they would (apart from this subsection) have effect in relation to an amount exceeding the gain or loss.”

3(1)Section 136(2) of FA 2006 (Real Estate Investment Trusts: availability of group reliefs) is amended as follows.

(2)For paragraph (a) substitute—

“(a)section 171 (transfer of assets within group),

(aa)sections 171A to 171C (reallocation of gain or loss within a group),”.

(3)In paragraph (b), for “reallocation or rollover of gain” substitute “degrouping: reallocation of gain or loss, or rollover of gain,”.

4In consequence of the amendment made by paragraph 1, omit—

(a)in FA 2000, section 101,

(b)in FA 2001, section 77,

(c)in FA 2003, in Schedule 33, paragraph 17, and

(d)in F(No.2)A 2005, section 36.

Commencement

5The amendments made by this Schedule have effect in relation to chargeable gains and allowable losses accruing on or after the day on which this Act is passed.

Section 32

SCHEDULE 13Chargeable gains in stock lending: insolvency etc of borrower

1TCGA 1992 is amended as follows.

2(1)Section 263B (stock lending arrangements) is amended as follows.

(2)In subsection (2), for “section 263C(2)” substitute “sections 263C(2) and 263CA(3) and (5)”.

(3)In subsection (4)—

(a)in paragraph (a), insert at the end “for a consideration equal to their market value at that time”,

(b)in paragraph (b), after “at that time” insert “for that consideration”, and

(c)insert at the end (not as part of paragraph (c))—

“This subsection does not apply where section 263CA (insolvency of borrower) applies.”

(4)In subsection (7), omit the definition of “interest”.

3After section 263C (stock lending involving redemption) insert—

“263CAStock lending: insolvency etc of borrower

(1)This section applies where, in the case of any stock lending arrangement—

(a)the borrower (B) becomes insolvent after the lender (L) has transferred the securities,

(b)as a result of the insolvency, the requirement for B to make a transfer back to L will not be complied with as regards some or all of the securities,

(c)collateral is used (whether directly or indirectly) to enable L to acquire securities (“replacement securities”) of the same description as the securities which will not be transferred back, and

(d)the replacement securities are acquired before the end of the period of 30 days beginning with the day on which B becomes insolvent (“the insolvency date”).

(2)In accordance with section 263B(2), the transfer of the securities under the arrangement is not to be regarded as a disposal by L for the purposes of this Act (but this is subject to subsection (5)).

(3)B is to be treated for the purposes of this Act as having acquired the securities which will not be transferred back to L; and that acquisition is to be treated—

(a)as being made on the insolvency date, and

(b)as being for a consideration equal to their market value on that date.

(4)The acquisition of the replacement securities is to be treated, as regards L, as if it were a transfer back of securities in accordance with the arrangement (so that, in accordance with section 263B(2), that acquisition is not regarded as an acquisition by L for the purposes of this Act).

(5)If the number of replacement securities is less than the number of securities which B is treated as having acquired, L is to be treated for the purposes of this Act as having made a disposal, at the insolvency date, of the difference (“the deemed disposal”).

(6)The consideration for the deemed disposal is—

(a)where all the collateral is used to enable L to acquire replacement securities, nil, and

(b)where not all the collateral is so used, the difference between—

(i)the market value (at the insolvency date) of the number of securities which could have been acquired using the collateral, and

(ii)the market value (at that date) of the number of securities which were in fact so acquired.

(7)But if L at any time receives any amount (whether arising out of B’s insolvency or otherwise) in respect of B’s liability to L in respect of the securities which are treated under subsection (5) as having been disposed of by L that amount is to be treated as a chargeable gain accruing at that time to L.

(8)The liability mentioned in subsection (7) is not to be treated as giving rise to a relevant non-lending relationship for the purposes of Part 6 of CTA 2009 (relationships treated as loan relationships etc).

(9)For the purposes of this section, B becomes insolvent—

(a)if a company voluntary arrangement takes effect under Part 1 of the Insolvency Act 1986,

(b)if an administration application (within the meaning of Schedule B1 to that Act) is made or a receiver or manager, or an administrative receiver, is appointed,

(c)on the commencement of a creditor’s voluntary winding up (within the meaning of Part 4 of that Act) or a winding up by the court under Chapter 6 of that Part,

(d)if an individual voluntary arrangement takes effect under Part 8 of that Act,

(e)on the presentation of a bankruptcy petition (within the meaning of Part 9 of that Act),

(f)if a compromise or arrangement takes effect under Part 26 of the Companies Act 2006,

(g)if a bank insolvency order takes effect under Part 2 of the Banking Act 2009,

(h)if a bank administration order takes effect under Part 3 of that Act, or

(i)on the occurrence of any corresponding event which has effect under or as a result of the law of Scotland or Northern Ireland or a country or territory outside the United Kingdom.

(10)In this section—

(a)“collateral” means an amount of money or other property which—

(i)is provided under the arrangement (or under arrangements of which the arrangement forms part), and

(ii)is payable to or made available for the benefit of L for the purpose of securing the discharge of the requirement to transfer any or all of the securities back to L, and

(b)any expression used in this section and in section 263B has the same meaning as in that section.”

4(1)The amendments made by paragraphs 2(2) and (3)(c) and 3 apply—

(a)in any case where B becomes insolvent on or after 24 November 2008, and

(b)where L makes an election under this paragraph, in any case where B becomes insolvent in the period beginning on 1 September 2008 and ending on 23 November 2008.

(2)An election under sub-paragraph (1)(b) must relate to all stock lending arrangements in which L is the lender and B is the borrower and must be made—

(a)where L is a company (within the meaning given by section 288(1) of TCGA 1992), no later than the second anniversary of the end of the accounting period of L in which 23 November 2008 falls, and

(b)otherwise, no later than 31 January 2011.

(3)Where section 263CA (inserted by paragraph 3) applies to any case which occurs before a period for which CTA 2009 has effect, the reference in subsection (8) of that section to a relevant non-lending relationship for the purposes of Part 6 of that Act is to be read as a reference to a relationship to which section 100 of FA 1996 applies.

Section 34

SCHEDULE 14Corporation tax treatment of company distributions

Part 1Insertion of new Part 9A of CTA 2009

1In CTA 2009, after Part 9 insert—

“Part 9ACompany distributions

Chapter 1The charge to tax

931ACharge to tax on distributions received

(1)The charge to corporation tax on income applies to any dividend or other distribution of a company, but only if the distribution is not exempt.

(2)Subsection (1) does not apply in the case of a distribution of a capital nature.

(3)For provision as to whether a distribution is exempt, see—

• Chapter 2 (distributions received by small companies), and

• Chapter 3 (distributions received by companies that are not small).

Chapter 2Exemption of distributions received by small companies

931BExemption from charge to tax

A dividend or other distribution of a company that is received in an accounting period of the recipient in which the recipient is a small company is exempt if—

(a)the payer is a resident of (and only of) the United Kingdom or a qualifying territory at the time that the distribution is received,

(b)the distribution is not of a kind mentioned in paragraph (d) or (e) of section 209(2) of ICTA (certain non-dividend distributions),

(c)no deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of the distribution, and

(d)the distribution is not made as part of a tax advantage scheme.

931CMeaning of “qualifying territory”

(1)For the purpose of section 931B a territory is a “qualifying territory” if—

(a)arrangements to which section 788 of ICTA applies (“double taxation relief arrangements”) have effect in relation to the territory, and

(b)the arrangements contain a non-discrimination provision.

(2)The Treasury may by regulations—

(a)provide that a territory specified in or of a description specified in the regulations that does not satisfy subsection (1)(a) or (b) is a qualifying territory for the purpose of section 931B, and

(b)provide that a territory so specified or described that satisfies subsection (1)(a) and (b) is not a qualifying territory for that purpose.

(3)For the purpose of section 931B a company is a resident of a territory if, under the laws of the territory, the company is liable to tax there—

(a)by reason of its domicile, residence or place of management, but

(b)not in respect only of income from sources in that territory or capital situated there.

(4)In subsection (1) “non-discrimination provision”, in relation to double taxation relief arrangements, means a provision to the effect that nationals of a state which is a party to those arrangements (a “contracting state”) are not to be subject in any other contracting state to—

(a)any taxation, or

(b)any requirement connected with taxation,

which is other or more burdensome than the taxation and connected requirements to which nationals of that other state in the same circumstances (in particular with respect to residence) are or may be subjected.

(5)In subsection (4) “national”, in relation to a contracting state, includes—

(a)an individual possessing the nationality or citizenship of the contracting state, and

(b)a legal person, partnership or association deriving its status as such from the laws in force in that contracting state.

(6)Regulations under this section may—

(a)describe a territory by reference to the double taxation relief arrangements for the time being in force in relation to the territory,

(b)make different provision in relation to different descriptions of company, and

(c)make provision having effect in relation to accounting periods current on the day on which the regulations are made.

Chapter 3Exemption of distributions received by companies that are not small

931DExemption from charge to tax

A dividend or other distribution of a company that is received in an accounting period of the recipient in which the recipient is not a small company is exempt if—

(a)the distribution falls into an exempt class (see sections 931E to 931Q),

(b)the distribution is not of a kind mentioned in paragraph (d) or (e) of section 209(2) of ICTA (certain non-dividend distributions), and

(c)no deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of the distribution.

Exempt classes

931EDistributions from controlled companies

(1)A dividend or other distribution falls into an exempt class if condition A or B is met.

(2)Condition A is that the recipient controls the payer.

(3)Condition B is that—

(a)the recipient is one of two persons who, taken together, control the payer,

(b)the recipient is a person in whose case the 40% test in section 755D(3) of ICTA is satisfied, and

(c)the other is a person in whose case the 40% test in section 755D(4) of ICTA is satisfied.

(4)Section 755D of ICTA (meaning of “control” etc) applies for the purposes of this section.

(5)As so applied, that section has effect with the omission of subsection (6)(c) and (d).

931FDistributions in respect of non-redeemable ordinary shares

A dividend or other distribution falls into an exempt class if it is made in respect of a share that—

(a)is an ordinary share, and

(b)is not redeemable.

931GDistributions in respect of portfolio holdings

(1)A dividend or other distribution falls into an exempt class if the recipient—

(a)holds less than 10% of the issued share capital of the payer,

(b)is entitled to less than 10% of the profits available for distribution to holders of the issued share capital of the payer, and

(c)would be entitled on a winding up to less than 10% of the assets of the company available for distribution to holders of the issued share capital of the payer.

(2)Where the payer has more than one class of share, references in subsection (1) to the issued share capital of the payer are to issued share capital of the same class as the share in respect of which the distribution is made.

(3)For the purposes of this section shares are not of the same class if the amounts paid up on them (otherwise than by way of premium) are different.

931HDividends derived from transactions not designed to reduce tax

(1)A dividend falls into an exempt class if it is paid in respect of relevant profits.

(2)In this section “relevant profits” means any profits available for distribution at the time that the dividend is paid, other than profits that reflect the results of a transaction, or of one or more of a series of transactions, where—

(a)the transaction or series of transactions achieve a reduction (other than a negligible reduction) in United Kingdom tax, and

(b)the purpose or one of the main purposes of that transaction or series of transactions is to achieve that reduction.

(3)A dividend that falls into an exempt class otherwise than by virtue of this section is for the purposes of this section treated, so far as possible, as paid in respect of relevant profits.

(4)Any other dividend is for the purposes of this section treated, so far as possible, as paid in respect of profits other than relevant profits.

(5)Where by virtue of subsection (4) part of a dividend is treated as paid in respect of relevant profits and part is treated as paid in respect of profits other than relevant profits, the two parts are treated for the purposes of this Part and Part 18 of ICTA (double taxation relief) as separate dividends.

931IDividends in respect of shares accounted for as liabilities

A dividend falls into an exempt class if the dividend is paid in respect of a share to which, at the time of the payment, section 521C (shares accounted for as liabilities treated as loan relationships) does not apply only because the condition in subsection (1)(f) of that section is not met.

Exempt classes: anti-avoidance

931JSchemes involving manipulation of controlled company rules

(1)This section applies to a dividend that would, apart from this section, fall into an exempt class by virtue of section 931E.

(2)The dividend does not fall into an exempt class by virtue of that section if—

(a)the dividend is paid as part of a scheme the main purpose, or one of the main purposes, of which is to secure that dividends of the payer received by the recipient fall into an exempt class by virtue of that section, and

(b)the following condition is met.

(3)The condition is that the dividend is paid in respect of pre-control profits.

(4)A dividend that falls into an exempt class otherwise than by virtue of section 931E is for the purposes of this section treated, so far as possible, as paid in respect of profits other than pre-control profits.

(5)Any other dividend is for the purposes of this section treated, so far as possible, as paid in respect of pre-control profits.

(6)In this section “pre-control profits” means any profits available for distribution at the time the dividend is paid that arose at a time when neither condition A nor condition B in section 931E was met.

(7)Where—

(a)the condition in subsection (2)(a) is met, and

(b)by virtue of subsection (5) part of a dividend is treated as paid in respect of pre-control profits and part is treated as paid in respect of profits other than pre-control profits,

the two parts are treated for the purposes of this Part and Part 18 of ICTA (double taxation relief) as separate dividends.

931KSchemes involving quasi-preference or quasi-redeemable shares

(1)This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class by virtue of section 931F.

(2)The distribution does not fall into an exempt class by virtue of that section if—

(a)the distribution is made as part of a scheme the main purpose, or one of the main purposes, of which is to secure that distributions of the payer received by the recipient fall into an exempt class by virtue of that section, and

(b)the following condition is met.

(3)The condition is that the distribution is made in respect of a share that—

(a)would not be an ordinary share, or

(b)would be redeemable,

were the rights under the scheme of each relevant person to be attached to the share.

931LSchemes involving manipulation of portfolio holdings rule

(1)This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class by virtue of section 931G.

(2)The distribution does not fall into an exempt class by virtue of that section if—

(a)the distribution is made as part of a scheme the main purpose, or one of the main purposes, of which is to secure that distributions of the payer received by the recipient fall into an exempt class by virtue of that section, and

(b)the following condition is met.

(3)The condition is that the distribution would not fall into an exempt class by virtue of section 931G if the reference in subsection (1) of that section to the recipient were to all relevant persons taken together.

931MSchemes in the nature of loan relationships

(1)This section applies to a dividend or other distribution that does not fall into an exempt class by virtue of section 931E but would, apart from this section, fall into an exempt class otherwise than by virtue of that section.

(2)The distribution does not fall into an exempt class if—

(a)the distribution is made as part of a tax advantage scheme, and

(b)conditions A to C are met.

(3)Condition A is that the distribution constitutes part of a return in relation to an amount that is produced by the scheme for a relevant person, or two or more relevant persons taken together.

(4)Condition B is that the return is economically equivalent to interest.

(5)For this purpose a return produced for a person or persons by a scheme in relation to an amount is “economically equivalent to interest” if (and only if)—

(a)it is reasonable to assume that it is a return by reference to the time value of that amount of money,

(b)it is at a rate reasonably comparable to a commercial rate of interest, and

(c)at the time the scheme is entered into by the person or any of the persons, there is no practical likelihood that it will cease to be produced in accordance with the scheme.

(6)Condition C is that there is a connection between the payer and the recipient for the accounting period of the payer in which the distribution is made.

(7)Section 466 (companies connected for an accounting period) applies for the purposes of subsection (6) as if that subsection were a provision of Part 5 to which that section is applied (but this does not affect the application of section 1316(1) (meaning of connected persons) for the purposes of any other provision of this Part).

931NSchemes involving distributions for which deductions are given

(1)This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class.

(2)The distribution does not fall into an exempt class if—

(a)the distribution is made as part of a tax advantage scheme, and

(b)the following condition is met.

(3)The condition is that a deduction is allowed to a resident of any territory outside the United Kingdom under the law of that territory in respect of an amount determined by reference to the distribution.

931OSchemes involving payments for distributions

(1)This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class.

(2)The distribution does not fall into an exempt class if—

(a)the distribution is made as part of a tax advantage scheme, and

(b)the following condition is met.

(3)The condition is that the scheme includes a payment, or the giving up of a right to income, by a relevant person where—

(a)the payment is made, or the right to income is given up, under a liability incurred for consideration in money or money’s worth all or any of which consists of, or of the right to receive, the distribution, and

(b)in the case of a payment, the conditions in subsections (2) and (4) to (7) of section 1301 (restriction of deductions for annual payments) apply to the payment.

931PSchemes involving payments not on arm’s length terms

(1)This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class.

(2)The distribution does not fall into an exempt class if—

(a)the distribution is made as part of a tax advantage scheme, and

(b)the following condition is met.

(3)The condition is that—

(a)the scheme includes a payment or receipt, or the giving up of a right to income, by a relevant person in respect of goods or services, and

(b)the amount of the payment or receipt, or the amount of income given up, differs from the amount the relevant person would have paid, received or given up in respect of those goods or services had the distribution not been made.

(4)This section does not apply to a scheme that consists of a transaction or series of transactions in relation to which Schedule 28AA to ICTA (provision not at arms length between parties under common control) applies.

931QSchemes involving diversion of trade income

(1)This section applies to a dividend or other distribution that would, apart from this section, fall into an exempt class.

(2)The distribution does not fall into an exempt class if—

(a)the distribution is made as part of a scheme entered into by the recipient and another relevant person (“C”),

(b)if C had received the distribution, it would be reasonable to assume that the distribution would be dealt with under Part 3 (trading income), and

(c)the main purpose, or one of the main purposes, of the scheme is to produce the result that the distribution is dealt with under this Part because it is received by the recipient.

(3)For the purposes of subsection (2)(b) it is to be assumed that, in the case of any relevant transaction to which a relevant person other than C is a party, C were that party to that transaction.

(4)In this section “relevant transaction” means any of the transactions giving rise to the distribution.

Chapter 4Supplementary

Election that distribution should not be exempt

931RElection that distribution should not be exempt

(1)This section applies where, apart from this section, a distribution (“the distribution”) would be exempt.

(2)If the recipient so elects, the distribution is not exempt.

(3)An election under this section must be made on or before the second anniversary of the end of the accounting period in which the distribution is received.

(4)Subsection (5) applies where the distribution is a dividend that is treated for certain purposes of Part 18 of ICTA (double taxation relief) as two separate dividends by virtue of section 801C of that Act (separate streaming of dividend so far as representing an ADP dividend of a CFC).

(5)If the recipient so elects—

(a)the distribution is to be treated for the purposes of this Part as if it were an ADP dividend and a separate residual dividend as provided for in that section of that Act, and

(b)the ADP dividend is not exempt.

(6)The reference in subsection (4) to section 801C of ICTA is to that section as it continues to have effect in accordance with paragraph 8(1) of Schedule 16 to FA 2009 in relation to dividends paid on or after 1 July 2009 for accounting periods beginning before that day.

Interpretation

931SMeaning of “small company”

(1)For the purposes of this Part a company is a “small company” in an accounting period if it is in that period a micro or small enterprise, as defined in the Annex to Commission Recommendation 2003/361/EC of 6 May 2003.

(2)But a company is not a “small company” in an accounting period if it is at any time in that period—

(a)an open-ended investment company,

(b)an authorised unit trust scheme,

(c)an insurance company, or

(d)a friendly society.

(3)In subsection (2)—

• “open-ended investment company” has the meaning given by section 236 of FISMA 2000;

• “authorised unit trust scheme” means a unit trust scheme (within the meaning given by section 237 of FISMA 2000) in relation to which a order under section 243 of that Act (authorisation orders) is in force;

• “insurance company” has the meaning given by section 431 of ICTA;

• “friendly society” has the meaning given by section 466(2) of ICTA.

931TMeaning of “payer”, “recipient” and “relevant person”

In this Part—

• “the payer”, in relation to a distribution, means the company that makes the distribution;

• “the recipient”, in relation to a distribution, means the company that receives the distribution;

• “a relevant person”, in relation to a distribution, means—

  (a)

  the company that receives the distribution, or

  (b)

  any person connected with that company.

931UMeaning of “ordinary share” and “redeemable”

(1)In this Part “ordinary share” means a share that does not carry any present or future preferential right to dividends or to a company’s assets on its winding up.

(2)A share is regarded as “redeemable” for the purposes of this Part only if it is redeemable as a result of its terms of issue (or any collateral arrangements)—

(a)requiring redemption,

(b)entitling the holder to require redemption, or

(c)entitling the issuing company to redeem.

931VMeaning of “scheme” and “tax advantage scheme”

“(1)For the purposes of this Part—

• “scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions;

• “tax advantage scheme” means a scheme the main purpose, or one of the main purposes, of which is to obtain a tax advantage (other than a negligible tax advantage).

(2)In this section “tax advantage” has the meaning given by section 840ZA of ICTA.

Boundary provisions

931WProvisions which must be given priority over this Part

(1)Any income so far as it falls within—

(a)this Part, and

(b)Chapter 2 of Part 3 (income taxed as trade profits),

is dealt with under Part 3.

(2)Any income so far as it falls within—

(a)this Part, and

(b)Chapter 3 of Part 4 (profits of property businesses) so far as the Chapter relates to a UK property business,

is dealt with under Part 4.

(3)Any income so far as it falls within—

(a)this Part, and

(b)Chapter 1 of Part 12 of ICTA (insurance companies),

is dealt with under that Chapter.”

Part 2Other amendments

ICTA

2ICTA is amended as follows.

3In section 13(7) (small companies' relief), omit “resident in the United Kingdom”.

4(1)Section 505(1)(c) (charitable companies: general) is amended as follows.

(2)After sub-paragraph (ii) insert—

“(iizza)from tax under Part 9A of CTA 2009 (company distributions),”.

(3)Omit sub-paragraph (iib).

5(1)Section 95ZA (taxation of UK distributions received by insurance companies) is amended as follows.

(2)In subsection (1), for “section 1285” substitute “section 130(2)”.

(3)In subsection (2)(a), omit “resident in the United Kingdom”.

6(1)Section 231 (tax credits for certain recipients of qualifying distributions) is amended as follows.

(2)In subsection (1)—

(a)omit “and section 219(4B) of the Finance Act 1994”,

(b)for “resident in the United Kingdom makes a” substitute “(whether resident in the United Kingdom or outside the United Kingdom) makes an exempt”, and

(c)for “another such company” substitute “a company resident in the United Kingdom”.

(3)After subsection (1A) insert—

“(1B)For the purposes of subsection (1) a qualifying distribution is “exempt” if it is exempt for the purposes of Part 9A of CTA 2009 (company distributions).”

7In section 795 (double taxation relief: computation of income subject to foreign tax), omit subsection (3A).

8(1)Section 799 (double taxation relief: computation of underlying tax in respect of a dividend) is amended as follows.

(2)In subsection (3) (as it has effect as amended by paragraph 8 of Schedule 30 to FA 2000)—

(a)before paragraph (a) insert—

“(za)if the dividend is received in an accounting period of the recipient in which the recipient is not a small company, and the dividend is a relevant dividend, the profits in respect of which the dividend is paid;”,

(b)in paragraph (a), insert at the beginning “in a case not falling under paragraph (za),”, and

(c)in paragraph (c), insert at the beginning “in a case not falling under paragraph (za),”.

(3)After subsection (3) insert—

“(3A)For the purposes of subsection (3)—

(a)“small company” has the same meaning as in Part 9A of CTA 2009 (company distributions),

(b)“relevant dividend” means a dividend that, for the purposes of section 931H of that Act (dividends derived from transactions not designed to reduce tax), is treated as paid in respect of profits other than relevant profits (see subsection (4) of that section), and

(c)the profits in respect of which a dividend is paid are the profits in respect of which the dividend is treated as paid for the purposes of that section.”

9Omit sections 806A to 806K (double taxation relief in relation to foreign dividends: onshore pooling and utilisation of eligible unrelieved foreign tax).

10In section 826 (interest on tax overpaid), omit subsection (7BC).

11(1)Paragraph 2 of Schedule 23A (manufactured dividends on UK equities: general) is amended as follows.

(2)After sub-paragraph (1) insert—

“(1A)Sub-paragraphs (1C) to (1E) apply where—

(a)a manufactured dividend is paid by a dividend manufacturer, and

(b)the dividend of which the manufactured dividend is representative is taxable.

(1B)For this purpose a dividend is “taxable” if—

(a)it is received by the dividend manufacturer and the charge to corporation tax on income applies to it, or

(b)it is received by a person other than the dividend manufacturer and the charge to corporation tax on income would have applied to it if it had been received by the dividend manufacturer.

(1C)Where the dividend manufacturer carries on a trade to which the manufactured dividend relates, and neither sub-paragraph (1D) nor (1E) applies, the manufactured dividend is to be treated as an expense of the trade.

(1D)Where the dividend manufacturer has investment business to which the manufactured dividend relates, the manufactured dividend is to be treated as expenses of management of the business for the purposes of Part 16 of CTA 2009.

(1E)Where the dividend manufacturer carries on life assurance business to which the manufactured dividend relates, the manufactured dividend is to be treated as if, to the extent that it is referable to basic life assurance and general annuity business, it were an expense payable falling to be brought into account at step 3 of section 76(7).

(1F)For the purposes of sub-paragraph (1E), the manufactured dividend is to be treated as referable to basic life assurance and general annuity business to the extent that the dividend of which it is representative—

(a)is received by the dividend manufacturer and is so referable by virtue of section 432A, or

(b)is received by a person other than the dividend manufacturer, and would have been so referable by virtue of section 432A if it had it been received by the dividend manufacturer.”

(3)In sub-paragraph (2), omit paragraph (b) (and the “and” before it).

(4)After sub-paragraph (3) insert—

“(3A)In its application in relation to a manufactured dividend by virtue of sub-paragraph (2) or (3), Part 9A of CTA 2009 (company distributions) has effect subject to the following modification.

(3B)The modification is that—

(a)the definition of “the payer” in section 931T is to be treated as omitted, and

(b)references in that Part to the payer are to be treated as references to the company that pays the dividend of which the manufactured dividend is representative.”